As filed with the Securities and Exchange Commission on
November
4, 2019
Registration
No. 333-233303
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.
4
TO
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MONOPAR THERAPEUTICS INC.
(Exact Name
of Registrant as Specified in Its Charter)
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Delaware
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2834
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32-0463781
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(State
or Other Jurisdiction ofIncorporation or Organization)
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(Primary
Standard IndustrialClassification Code Number)
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(I.R.S.
EmployerIdentification Number)
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1000
Skokie Blvd., Suite 350
Wilmette, IL 60091
(847) 388-0349
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)
Chandler
D. Robinson
Chief Executive Officer
1000
Skokie Blvd., Suite 350
Wilmette, IL 60091
(847) 388-0349
(Name,
Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent For Service)
Copies to:
Robert Rupp, Esq.
Baker & Hostetler LLP
200 Civic Center Drive, Suite 1200
Columbus,
OH 43215
(614)
228-1541
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Dean
M. Colucci
Kelly
A. Dabek
Duane
Morris LLP
1540
Broadway
New
York, NY 10036
(212)
692-1000
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Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.
☐
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated
filer ☐
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Accelerated filer
☐
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Non-accelerated
filer ☐
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Smaller reporting
company ☒
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Emerging growth
company ☒
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities Act.
☒
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
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Amount to be
Registered (1)
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Proposed Maximum
Offering
Price per Share
(2)
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Proposed Maximum Aggregate Offering Price (1)(2)
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Amount of Registration Fee (3)
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Common
Stock, par value $0.001 per share
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2,555,556
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$
10.00
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$ 25,555,560
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$3,318
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(1)
Includes the additional shares of common stock that may be
purchased by the underwriters pursuant to their
option.
(2)
Estimated solely
for the purpose of computing the amount of the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as
amended.
(3)
Previously paid
The
Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or
until the registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may
determine.
SUBJECT TO COMPLETION, DATED NOVEMBER 4, 2019
PRELIMINARY PROSPECTUS
The
information in this preliminary prospectus is not complete and may
be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell
these securities and we are not soliciting offers to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
2,222,223
shares
Common Stock
This is
the initial public offering of the common stock of Monopar
Therapeutics Inc. We are offering 2,222,223 shares of
our common stock.
Prior
to this offering, there has been no public market for our common
stock. We currently expect the initial public offering price to be
between $8.00 and $10.00 per share of common stock.
We have
been approved to list our common stock after pricing
on the Nasdaq Capital Market under the symbol “MNPR”
upon closing this offering.
We are
an “emerging growth company” as defined under the U.S.
federal securities laws and, as such, have elected to comply with
certain reduced reporting requirements for this prospectus and
future filings. See “Summary - Implications of Being an
Emerging Growth Company.”
Investing
in our Common Stock involves a high degree of risk. Before buying
any shares, you should carefully read the risks that are described
in the “Risk Factors” section beginning on page
10.
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Initial public
offering price
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$
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$
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Underwriting
discounts and commissions(1)
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$
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$
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Proceeds to
Monopar, before expenses
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$
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$
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(1)
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See
“Underwriting” for additional information regarding
underwriting compensation.
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The
underwriters may also exercise their option to purchase up to an
additional 333,333 shares of common stock from us at
the initial public offering price, less the underwriting discount,
for 30 days after the date of this prospectus.
Certain of our
existing stockholders and their affiliated entities, including
those affiliated with certain of our officers and directors, have
indicated an interest in purchasing up to approximately $8,000,000
of shares of our common stock at the initial public offering price.
However, because indications of
interest are not binding agreements or commitments to purchase, the
underwriters may determine to sell more, less or no shares in this
offering to any of these stockholders or their affiliates, or any
of these stockholders or their affiliates may determine to purchase
more, less or no shares in this offering.
Neither the U.S. Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The
shares of common stock will be ready for delivery on or about
, 2019.
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JonesTrading
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Aegis
Capital Corp.
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Arcadia Securities
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The
date of this prospectus is
,
2019.
TABLE
OF CONTENTS
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F-1
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We
have not and the underwriters have not authorized anyone to provide
you with any information or to make any representations other than
those contained in this prospectus or in any free writing
prospectus we have prepared. We and the underwriters take no
responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where such offers and sales are
permitted. The information in this prospectus is accurate only as
of the date of this prospectus, regardless of its time of delivery
or of any sale of shares of our common stock. Our business,
financial condition, results of operations and future growth
prospects may have changed since that date.
For
investors outside the U.S.: Neither we nor any of the underwriters
have done anything that would permit this offering of our common
stock or possession or distribution of this prospectus in that
jurisdiction where action for that purpose is required, other than
in the U.S. Persons outside of the U.S. who come into possession of
this prospectus must inform themselves about and observe any
restrictions relating to, the offering of the shares of our common
stock and the distribution of this prospectus outside of the
U.S.
i
This
summary highlights certain information presented in greater detail
elsewhere in this prospectus. This summary does not contain all of
the information that you should consider in making an investment
decision. You should read the entire prospectus carefully,
including the information under “Risk Factors,”
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our condensed
consolidated financial statements and the related notes thereto
included elsewhere in this prospectus, before investing. This
prospectus includes forward-looking statements that involve risks
and uncertainties. See “Cautionary Statement Concerning
Forward-Looking Statements.” Unless the context
otherwise requires, references to “Monopar
Therapeutics,” “Monopar,” the
“Company,” “we,” “us” and
“our” refer to Monopar Therapeutics Inc. and its
subsidiaries.
Overview
We are
a clinical stage biopharmaceutical company focused on developing
proprietary therapeutics designed to improve clinical outcomes for
cancer patients. We are building a drug development pipeline
through the licensing and acquisition of oncology therapeutics in
late preclinical and clinical development stages. We leverage our
scientific and clinical experience to help de-risk and accelerate
the clinical development of our drug product
candidates.
We
intend to begin a Phase 3 clinical development program for our lead
product candidate, Validive (clonidine mucobuccal tablet; clonidine
MBT), in the first quarter of 2020.
Validive is designed to be used prophylactically to reduce the
incidence, delay the time to onset, and decrease the duration of
severe oral mucositis (“SOM”) in patients undergoing
chemoradiotherapy (“CRT”) for oropharyngeal cancer
(“OPC”). SOM is a painful and debilitating inflammation
and ulceration of the mucous membranes lining the oral cavity and
oropharynx in response to chemoradiation. The majority of patients
receiving CRT to treat their OPC develop SOM, which remains one of
the most common and devastating side effects of treatment in this
indication. The potential clinical benefits to patients of reducing
or delaying the incidence of SOM, or reducing the duration of SOM,
include: reduced treatment discontinuations leading to potentially
improved overall survival outcomes; reduced mouth and throat pain
avoiding the need to receive parenteral nutrition; and decreased
long-term and often permanent debilitation arising from swallowing
difficulties, neck and throat spasms, and lung complications due to
food aspiration. Our mucobuccal tablet (“MBT”)
formulation is a novel delivery system for clonidine that allows
for prolonged and enhanced local delivery of drug in the regions of
mucosal radiation damage in patients with OPC. Validive has been
granted fast track designation in the U.S., orphan drug designation
in the EU, and has global intellectual property patent protection
through mid-2029 not accounting for possible
extensions.
In
September 2017, we exercised an option to license Validive from
Onxeo S.A., the company that developed Validive through its Phase 2
clinical trial. In the completed Phase 2 clinical trial, Validive
demonstrated clinically meaningful efficacy signals within the
64-patient OPC population randomized to placebo, Validive 50
µg dose and Validive 100 µg dose. The absolute incidence
of SOM in OPC patients who received a dose of Validive 100 µg
once per day was reduced by 26.3% (incidence rate of 65.2% in
placebo, 45.0% in Validive 50 µg group, and 38.9% in Validive
100 µg group). The median time to onset of SOM was 37 days in
the placebo cohort; 45 days in the Validive 50 µg cohort and
no median time of onset was reached in the Validive 100 µg
group since fewer than half of this cohort of patients developed
SOM. There was also a 37.8% reduction in the median duration of the
SOM for the Validive 100 µg group versus placebo (41.0 days
placebo group, 34.0 days Validive 50 µg group, and 25.5 days
Validive 100 µg group) in patients that developed SOM. Median
duration of SOM across all patients, inclusive of both those that
did and did not develop SOM, was 17 days in the placebo group and 0
days in each of the Validive 50 and 100 µg groups. A positive
dose response was seen in each of these three clinical endpoints.
Additionally, patients in the Validive cohorts in the Phase 2
clinical trial demonstrated a safety profile similar to that
of placebo. While not designed by us, Onxeo’s promising
preclinical studies and Phase 2 clinical trial have informed the
design and conduct of what we believe will be an effective Phase 3
clinical program.
SOM
typically arises in the immune tissue at the back of the tongue and
throat, which comprise the oropharynx, and consists of acute severe
tissue damage and pain that prevents patients from swallowing,
eating and drinking. Validive stimulates the alpha-2 adrenergic
receptor on macrophages (white blood cells present in the
immune tissues of the oropharynx) suppressing pro-inflammatory
cytokine expression. Validive exerts its effects locally in the
mouth over a prolonged period of time through its unique MBT
formulation. Patients who develop SOM are also at increased risk of
developing late onset toxicities, including trismus (jaw, neck, and
throat spasms), dysphagia, and lung complications, which are often
irreversible and lead to increased hospitalization and the need for
further interventions sometimes years after completion of
chemoradiotherapy. We believe that a reduction in the incidence and
duration of SOM by Validive will have the potential to reduce
treatment discontinuation and/or treatment delays potentially
leading to improved survival outcomes, and reducing or eliminating
these long-term morbidities.
The OPC
target population for Validive is the most rapidly growing segment
of head and neck cancer (“HNC”) patients, with an
estimated 40,000 new cases of OPC in the U.S alone in 2019.
The growth in OPC is
driven by the increasing prevalence of oral human papilloma
virus (“HPV”) infections in the U.S. and around
the world. Despite the availability of a pediatric/adolescent HPV
vaccine, the rate of OPC incidence in adults is not anticipated to
be materially reduced for many decades due to low adoption of the vaccine
to date. As a result, the incidence of HPV-driven OPC is
projected to increase for many years to come and will continue to
support a clinical need for Validive for the prevention of
CRT-induced SOM in patients with OPC since CRT is the standard of
care treatment.
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A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) was submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from
the European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP). Based on comments and guidance provided by FDA and
EMA, we currently intend to initiate a Phase 3 clinical development
program in the first quarter of 2020 to
support registration. This program will consist of an adaptive
design trial with an interim analysis planned for approximately
twelve months after the first patient is dosed, and a confirmatory
second trial planned to commence shortly after completion of this
interim analysis.
Our
second product candidate, camsirubicin, is a novel analog of
doxorubicin which has been designed to reduce the cardiotoxic side
effects generated by doxorubicin while retaining anti-cancer
activity. Camsirubicin is not metabolized to the derivatives that
are believed to be responsible for doxorubicin’s cardiotoxic
effects. A Phase 2 clinical trial for camsirubicin has been
completed in patients with advanced (e.g. unresectable or
metastatic) soft tissue sarcoma (“ASTS”). Average life
expectancy for these patients is 12-15 months. In this study, 52.6%
of patients
evaluable for tumor progression demonstrated clinical
benefit (partial
response or stable disease), which was proportional to dose
and consistently observed at higher cumulative doses of
camsirubicin (>1000 mg/m2). Camsirubicin was
very well tolerated in this study and underscored the ability to
potentially administer camsirubicin without restriction for
cumulative dose in patients with ASTS. Doxorubicin is limited to a
lifetime cumulative dose maximum of 450 mg/m2. Even if a patient
is responding, they are pulled off of doxorubicin treatment once
this cumulative dose has been reached.
Based
on encouraging clinical results to date, we plan to continue the
development of camsirubicin as first line treatment in patients
with ASTS, where the current first line treatment is doxorubicin.
The aim is to administer camsirubicin without restricting
cumulative dose, thereby potentially improving efficacy by keeping
patients on treatment who are responding. In June 2019, we entered
into a clinical collaboration with Grupo Español de
Investigación en Sarcomas (“GEIS”). GEIS will lead
a multi-country, randomized, open-label Phase 2 clinical trial
evaluating camsirubicin head-to-head against doxorubicin in
patients with ASTS. GEIS is an internationally renowned non-profit
organization focused on the research, development and management of
clinical trials for sarcoma, that has worked with many of the
leading biotech and global pharmaceutical companies. Enrollment of
the trial is currently expected to begin in the first quarter
of 2020, and to include approximately 170 ASTS patients, an
interim analysis, and take around two years to enroll. The primary
endpoint of the trial will be progression-free survival, with
secondary endpoints including overall survival and incidence of
treatment-emergent adverse events. In October 2019,
the EMA’s Committee for Orphan Medicinal Products adopted a
positive opinion to grant orphan drug designation for camsirubicin
for the treatment of soft tissue sarcoma in the
EU.
Our
third program, MNPR-101, is a novel first-in-class humanized
monoclonal antibody to the urokinase plasminogen activator receptor
(“uPAR”) for the treatment of advanced cancers. The
IND-enabling work is nearly completed.
Our
management team has extensive experience in developing therapeutics
through regulatory approval and commercialization. In aggregate,
companies they co-founded have achieved four drug approvals in the
U.S. and the EU, successfully sold an asset developed by management
which is currently in Phase 3 clinical trials, and completed the
sale of a biopharmaceutical company for over $800 million in cash.
Understanding the preclinical, clinical, regulatory and commercial
development processes and hurdles are key factors in successful
drug development and the expertise demonstrated by our management
team across all of these areas increases the probability of success
in advancing the product candidates in our product
pipeline.
Our
Product Pipeline
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Our
Product Candidates
Validive (clonidine mucobuccal tablet; clonidine MBT)
Validive is an MBT
of clonidine. The MBT formulation was developed to enhance the oral
mucosal drug delivery and significantly increase the salivary
concentrations of the active ingredient while minimizing systemic
absorption. The Validive tablet is tasteless and administered once
daily by affixing it to the outside of the patient’s upper
gum where it dissolves slowly over the period of several hours,
resulting in the extended release of clonidine into the oral cavity
and oropharynx, the site of SOM following chemoradiation treatment
for OPC. Validive therapy is designed to begin on the first day of
chemoradiation treatment and continue daily through the last day of
treatment.
SOM is
a painful and debilitating inflammation and ulceration of the
mucous membranes lining the oral cavity and oropharynx in response
to chemoradiation therapy. Patients receiving CRT to treat their
OPC often develop SOM, which remains one of the most common and
devastating side effects of treatment in this indication. We
believe Validive has the potential to address several critical
elements that affect SOM patients, including:
Reduction in the incidence of
SOM. SOM can
increase the risk of acute and chronic comorbidities, including
dysphagia, trismus and lung complications, which are often
irreversible and lead to increased hospitalization and the need for
additional interventions. In a Phase 2 clinical trial, the
OPC patient cohort treated with Validive 100 µg demonstrated a
reduction in the absolute incidence of SOM compared to placebo of
26.3% (incidence rate of 65.2% in placebo, 45.0% in Validive 50
µg group, 38.9% in Validive 100 µg group). A reduced
incidence of SOM in OPC patients may lower the risk of acute and
chronic comorbidities and
improve quality of life.
Delay in the time to onset of SOM. SOM
can cause cancer treatment delay and/or discontinuation, which may
impact overall survival outcomes. In a Phase 2 clinical trial, the
OPC patients had a time to onset of SOM of 37 days in the placebo
cohort; 45-day time to onset of SOM in the Validive 50 µg
cohort; and median was not reached as fewer than half of the
patients developed SOM in the Validive 100 µg group.
Prolonging time to onset of SOM may lead to fewer missed
chemoradiotherapy treatments, resulting in improved overall
survival outcomes.
Decrease in the duration of
SOM. Longer
duration of SOM leads to a higher risk of the need for parenteral
nutrition and lower quality of life. SOM patients experience
inability to drink and/or eat, and difficulty swallowing often
resulting in malnourishment and feeding tube intervention. The
Phase 2 clinical trial data demonstrated a 15.5-day reduction (by
37.8%) in the duration of SOM for patients treated with Validive
100 µg (41 day median duration with placebo, 34 days with the
Validive 50 µg group, and 25.5 days for the Validive 100
µg group) in patients that developed SOM. Median
duration across all patients, inclusive of both those that did and
did not develop SOM, was 17 days in the placebo group and 0 days in
each of the Validive 50 and 100 µg groups. Reduced duration of
SOM may result in lower risk of malnourishment and feeding tube
intervention, and fewer treatment terminations/delays.
Camsirubicin (5-imino-13-deoxydoxorubicin; formerly MNPR-201,
GPX-150)
Camsirubicin is a
proprietary doxorubicin analog that is selective for topoisomerase
II-alpha. Doxorubicin is used to treat adult and pediatric solid
and blood (hematologic) cancers, including soft tissue sarcomas,
breast, gastric, ovarian and bladder cancers, leukemias and
lymphomas. The clinical efficacy of doxorubicin has historically
been limited by the risk of patients developing irreversible,
potentially life-threatening cardiotoxicity, despite clinical
studies demonstrating the anti-cancer benefit of higher doses of
doxorubicin administered for longer periods of time. For example,
several clinical studies completed in the 1990s demonstrated that
concurrent doxorubicin (60 mg/m2, 8 cycles) and
paclitaxel gave a 94% overall response rate in patients with
metastatic breast cancer but led to 18% of these patients
developing congestive heart failure. Reduction of doxorubicin to
4-6 cycles of treatment decreased the incidence of congestive heart
failure, but also reduced response rates to 45-55%.
Camsirubicin has
been engineered specifically to retain the anticancer activity of
doxorubicin while minimizing the toxic effects on the heart.
Similar to doxorubicin, the antitumor effects of camsirubicin are
mediated through the stabilization of the topoisomerase II complex
after a DNA strand break and DNA intercalation leading to tumor
cell apoptosis (cell death). Inhibiting the topoisomerase II-alpha
isoform is desired for the anti-cancer effect, while inhibiting the
topoisomerase II-beta isoform has been demonstrated to mediate, at
least in part, the cardiotoxicity associated with doxorubicin.
Camsirubicin is substantially more selective than doxorubicin for
inhibiting topoisomerase II-alpha versus topoisomerase II-beta.
This selectivity may at least partly explain the minimal
cardiotoxicity that has been observed for camsirubicin in
preclinical and clinical studies to date. We believe these
attributes provide a strong rationale to develop camsirubicin
without restriction on cumulative dose, in a broad spectrum of
cancer types.
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Development of
camsirubicin is being pursued initially in patients with advanced
soft tissue sarcoma (ASTS). Currently, these patients receive
doxorubicin in the 1st line and
camsirubicin will be evaluated in a randomized phase 2 trial head
to head against doxorubicin. Although doxorubicin has
been the standard of care treatment for over 40 years for patients
with ASTS, patients are pulled off treatment to limit irreversible
heart failure once the cumulative dose reaches 450 mg/m2, even if they are
experiencing clinical benefit. As a result, median progression free
survival for ASTS patients is approximately 6 months, with median
overall survival of 12-15 months. Thus, there is a significant
unmet opportunity to develop a replacement for doxorubicin that
retains anti-cancer activity while reducing or eliminating the risk
for irreversible heart failure.
MNPR-101 (formerly huATN-658)
MNPR-101 is a
novel, preclinical stage drug candidate. It is a first-in-class
humanized monoclonal antibody to the urokinase plasminogen
activator receptor (“uPAR”), a well-credentialed cancer
therapeutic target. uPAR is a protein receptor that sits on the
cell surface of, and is overexpressed in, many deadly cancers, but
has little to no expression in healthy tissue; several Phase 1
imaging studies in human advanced cancer patients show that uPAR is
detected selectively in the tumor.
In
normal cells, uPAR is transiently expressed as part of a highly
regulated process required for the breakdown of the extracellular
matrix during normal tissue remodeling. In cancer, however, uPAR is
constitutively over-expressed by the tumor cell, and the uPAR
extracellular matrix degrading function is hijacked by the tumor to
support tissue invasion, metastasis, and angiogenesis. It is
important to tumor cell survival, and uPAR expression increases in
high grade and metastatic disease.
MNPR-101 has
demonstrated significant anti-tumor activity in numerous
preclinical models of tumor growth, both as a monotherapy and in
combination with other therapeutics and is being advanced toward an
IND. Based on the selective expression of uPAR in numerous tumor
types, we anticipate MNPR-101 will be well-tolerated and amenable
to a variety of combination treatment approaches in the
clinic.
Our Strategy
Leveraging
the experience and the demonstrated competencies of our management
team, our strategic goal is to acquire, develop and commercialize
promising oncology product candidates that address the unmet
medical needs of cancer patients. The five key elements of our
strategy to achieve this goal are to:
●
Leverage data generated from
the Phase 2 Validive clinical trial to position us well for a
successful Phase 3 clinical program for Validive for SOM in
OPC. In a Phase 2 clinical
trial the absolute incidence of SOM in OPC patients was reduced by
26.3%, the time to onset was delayed, and the duration in
patients that developed SOM was decreased by 15.5 days in the
Validive 100 µg cohort versus placebo. In addition to the data
from the Phase 2 clinical trial, we believe the guidance from our
key opinion leaders (“KOLs”) as well as from the FDA
and EMA, and our own internal clinical trial design
expertise, position us well for a successful Phase 3 clinical trial
program.
●
Obtain FDA approval of Validive
and maximize the commercial potential of Validive in the U.S. and
the EU, seeking partnerships outside these markets.
Following a potentially successful
Phase 3 clinical program of Validive and potential FDA approval, we
currently intend to commercialize Validive in the U.S. and the EU
which may include establishing our own specialty sales force and
seeking partnerships outside of these territories for regulatory
approval and drug sales and distribution.
●
Advance the clinical
development of camsirubicin, by pursuing existing clinical
indications where doxorubicin has demonstrated efficacy.
ASTS will be the first indication, which will allow camsirubicin to
go head to head against doxorubicin, the current 1st line treatment. In
this indication, camsirubicin previously demonstrated clinical
benefit (stable disease or partial response)
in 52.6% of patients
evaluable for tumor
progression in a single arm Phase 2 study. Clinical
benefit was proportional to dose and consistently observed at
higher cumulative doses of camsirubicin (>1000 mg/m2). Camsirubicin was
very well tolerated in this Phase 2 study and underscored the
ability to potentially administer camsirubicin without restriction
for cumulative dose (doxorubicin is limited to 450 mg/m2 cumulative dose due
to heart toxicity).
●
Continue the development of
MNPR-101 and expand our drug development pipeline through
in-license and acquisition of oncology product candidates.
We plan to continue the development of
MNPR-101 and the expansion of our drug development pipeline through
acquiring or in-licensing additional oncology product candidates,
particularly those that leverage existing scientific and clinical
data that helps de-risk the next steps in clinical
development.
●
Utilize the expertise and prior
experience of our team in the areas of asset acquisition, drug
development and commercialization to establish ourselves as a
leading biopharmaceutical company. Our senior executive team has relevant experience
in biopharmaceutical in-licensing and acquisitions as well as
developing product candidates through approval and
commercialization. In aggregate, our team has co-founded BioMarin
Pharmaceutical (Nasdaq: BMRN), Raptor Pharmaceuticals ($800 million
sale to Horizon Pharma), and Tactic Pharma, LLC (“Tactic
Pharma”) (sale of lead asset, choline tetrathiomolybdate,
which was ultimately acquired by Alexion in June 2018 for $764
million).
|
Risks Associated with our Business
Our business is subject to numerous risks and uncertainties,
including those highlighted in the section titled “Risk
Factors” immediately following this prospectus summary. These
risks include, among others, the following:
●
We
are a clinical stage biopharmaceutical company with a history of
losses. We expect to continue to incur significant losses for the
foreseeable future and may never achieve or maintain profitability,
which could result in a decline in the market value of our common
stock.
●
We
have a limited operating history, no revenues from operations, and
are dependent upon raising capital to continue our drug development
programs.
●
We
do not have and may never have any approved products on the market.
Our business is highly dependent upon receiving approvals from
various U.S. and international governmental agencies and will be
severely harmed if we are not granted approval to manufacture and
sell our product candidates.
●
Our
clinical trials may not yield sufficiently conclusive results for
regulatory agencies to approve the use of our
products.
●
If
we experience delays or difficulties in the enrollment of subjects
in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented, which would materially affect our
financial condition.
●
We
rely on third parties to conduct our non-clinical studies and our
clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, we may be
unable to obtain regulatory approval for or commercialize our
current product candidates or any future products and our financial
condition will be adversely affected.
●
Funds
raised in the near term will not be sufficient to
complete our Phase 3 clinical development of Validive, and
will require that we raise additional funds.
When we raise additional funds in the future, if
at all, to complete our Phase 3 clinical program for
Validive, it may not be on favorable terms. If we are unable to to
raise enough funds in the future, we may have to consider strategic
options such as out-licensing product rights, restructuring, or
possibly discontinuing our operations.
●
We
face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer if
we fail to compete effectively. Competition and technological
change may make our product candidates obsolete or
non-competitive.
●
The
termination of third-party licenses could adversely affect our
rights to important compounds or technologies.
●
If
we and our third-party licensors do not obtain and preserve
protection for our respective intellectual property rights, our
competitors may be able to take advantage of our development
efforts to develop competing drugs.
●
If
we lose key management leadership, and/or scientific personnel, and
if we cannot recruit qualified employees or other significant
personnel, we may experience program delays and increased
compensation costs, and our business may be materially
disrupted.
Implications of Being an Emerging Growth Company
We
qualify as an “emerging growth company” as defined in
the Jumpstart our Business Startups Act of 2012 (“JOBS
Act”). An emerging growth company may take advantage of
specified reduced reporting and other burdens that are otherwise
applicable generally to public companies. These provisions include,
but are not limited to:
●
inclusion
of only two years, as compared to three years, of audited financial
statements in addition to any required unaudited interim financial
statements with correspondingly reduced “Management’s
discussion and analysis of financial condition and results of
operations” disclosures;
●
an
exemption from the auditor attestation requirement in the
assessment of our internal control over financial reporting
pursuant to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley
Act”);
●
an
exemption from compliance with any new requirements adopted by the
Public Company Accounting Oversight Board (“PCAOB”)
requiring mandatory audit firm rotation;
●
reduced
disclosure about executive compensation arrangements;
and
●
an
exemption from the requirement to seek non-binding advisory votes
on executive compensation or golden parachute
arrangements.
We
may take advantage of these provisions until we are no longer an
emerging growth company. We will remain an emerging growth company
until the earliest of (1) the last day of the year (a) following
the fifth anniversary of the completion of an initial public
offering, (b) in which we have total annual gross revenue of at
least $1.07 billion or (c) in which we are deemed to be a large
accelerated filer, which means the market value of our common stock
that is held by non-affiliates exceeds $700 million as of the prior
June 30th, and (2) the date on which we have issued more than $1.0
billion in non-convertible debt during the prior three-year
period.
We
have elected to take advantage of certain of the reduced disclosure
obligations in the registration statement, of which this prospectus
is a part, and may elect to take advantage of other reduced
reporting requirements in future filings. As a result, the
information that we provide to our stockholders may be different
than you might receive from other public reporting companies in
which you hold equity interests.
The
JOBS Act permits an emerging growth company such as us to take
advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have
irrevocably elected to opt out of this provision and, as a result,
we will comply with new or revised accounting standards when they
are required to be adopted by public companies that are not
emerging growth companies. In addition, we are also a
“smaller reporting company” as defined in Rule 12b-2 of
the Exchange Act and have elected to take advantage of certain of
the scaled disclosure requirements available to smaller reporting
companies such as avoiding the extensive narrative disclosure
required of other reporting companies, particularly in the
description of executive compensation.
|
Corporate
Information
We were
formed as a Delaware limited liability company in December 2014,
with the name Monopar Therapeutics, LLC. In December 2015, we
converted to a Delaware C corporation. Our principal executive
offices are located at 1000 Skokie Blvd, Suite 350, Wilmette, IL
60091. Our telephone number is (847) 388-0349. Our corporate
website is located at www.monopartx.com. Any information contained
in, or that can be accessed through our website, is not
incorporated by reference in this prospectus.
Trademark
notice
We have
registered trademarks with the U.S. Patent and Trademark Office
(“USPTO”), for the following trademarks:
“Validive”, “Baxefyn”,
“Vidarys”, “Cotilix”, “Arvita”
and “Clonidol”. All other trademarks, service marks and
trade names in this prospectus are the property of their respective
owners. We have omitted the ® and ™ designations, as
applicable, for the trademarks used herein.
|
Common
Stock offered by us
|
2,222,223 shares
|
Common
Stock to be
outstanding after this offering
|
11,513,644 shares
|
Option
granted to underwriters to purchase additional shares
|
333,333 shares
Unless
otherwise indicated, the information presented in this prospectus
assumes that the underwriters’ option will not be
exercised.
|
Use of
proceeds
|
We
expect to receive net proceeds from this offering of approximately
$18.3 million, or approximately
$21.3
million if the underwriters exercise their option to purchase
additional shares of our Common Stock in full, assuming an initial
public offering price of $9.00 per share, which is the midpoint of
the price range set forth on the cover page of this prospectus,
after deducting the underwriting discount and estimated offering
expenses payable by us.
We
intend to use the net proceeds from this offering (including any
additional proceeds that we may receive if the underwriters
exercise their option to purchase additional shares of our Common
Stock) as follows:
● Approximately
$10-15 million to advance our global Phase 3 clinical
program for Validive, including building our clinical, regulatory
and manufacturing team to support the program. Proceeds from this
offering are intended to advance Validive
to the interim results of the adaptive design clinical
trial.
● Approximately
$4-8 million
for manufacturing and support of the GEIS-sponsored Phase 2
clinical trial for camsirubicin and for further development of
MNPR-101.
● The remainder for
general corporate purposes. See “Use of Proceeds.” We
will need to raise additional funds to complete the Validive
clinical trial program through potential approval and, if approved,
through commercialization, to support further development of
camsirubicin and MNPR-101, and to expand our product
pipeline.
|
Dividend policy
|
We do not
anticipate paying any cash dividends on our Common Stock at any
time in the foreseeable future.
|
Proposed
Nasdaq Capital Market symbol
|
We have
been approved to list our Common Stock after pricing
on the Nasdaq Capital Market under the Symbol “MNPR”
upon closing of this offering.
|
Risk
factors
|
Investing
in our Common Stock involves a high degree of risk. See “Risk
Factors” beginning on page 10 of this prospectus for a
discussion of factors you should carefully consider before deciding
to invest in our Common Stock.
|
Certain of our
existing stockholders and their affiliated entities, including
those affiliated with certain of our officers and directors, have
indicated an interest in purchasing up to approximately $8,000,000
of shares of our common stock at the initial public offering price.
However, because indications of
interest are not binding agreements or commitments to purchase, the
underwriters may determine to sell more, less or no shares in this
offering to any of these stockholders or their affiliates, or any
of these stockholders or their affiliates may determine to purchase
more, less or no shares in this offering.
The
number of shares of our Common Stock to be outstanding after this
offering is based on an aggregate of 9,291,421 shares of our Common
Stock outstanding as of November 4, 2019 and
excludes:
●
1,105,896 shares of
our Common Stock issuable upon the exercise of outstanding stock
options (weighted-average exercise price of $2.99;
726,444 shares vested); and
●
494,104 shares of
our Common Stock reserved for issuance under our 2016 Stock
Incentive Plan.
Except as otherwise indicated, all information in this prospectus
assumes:
●
All shares referenced above and throughout this registration
statement take into account a 70-for-1 stock split of our Common
Stock effected in March 2017.
●
No exercise by the underwriters of their option to purchase
additional shares of our Common Stock.
|
The following tables set forth a summary of our
historical financial data as of, and for the periods ended on, the
dates indicated. The statements of operations data for the three
and six months ended June 30, 2019 and 2018 and the balance sheet
data as of June 30, 2019, are derived from our unaudited
condensed consolidated financial statements as of June 30, 2019 and
related notes included elsewhere in this prospectus. The statements
of operations data for the years ended December 31, 2018 and 2017
are derived from our audited consolidated financial statements as
of December 31, 2018 and related notes included elsewhere in this
prospectus. You should read these data together with our financial
statements and related notes appearing elsewhere in this prospectus
and the information in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
Our historical results are not necessarily indicative of the
results to be expected in the future and our interim results are
not necessarily indicative of results we expect for the full
year.
(In thousands, except shares and per share
amounts)
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
|
|
|
|
|
|
Revenues
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
Operating
expenses:
|
|
|
|
|
|
|
Research
and development
|
1,775
|
935
|
329
|
493
|
1,165
|
950
|
In-process
research and development
|
-
|
14,502
|
-
|
-
|
-
|
-
|
General
and administrative
|
1,628
|
1,166
|
603
|
347
|
1,175
|
787
|
Total
operating expenses
|
3,403
|
16,603
|
932
|
840
|
2,340
|
1,737
|
Loss
from operations
|
(3,403)
|
(16,603)
|
(932)
|
(840)
|
(2,340)
|
(1,737)
|
Other
income:
|
|
|
|
|
|
|
Interest
income
|
103
|
48
|
26
|
19
|
58
|
40
|
Loss
before income tax benefit
|
(3,300)
|
(16,555)
|
(906)
|
(821)
|
(2,282)
|
(1,697)
|
Income
tax benefit
|
72
|
-
|
-
|
-
|
-
|
-
|
Net
loss
|
(3,228)
|
(16,555)
|
(906)
|
(821)
|
(2,282)
|
(1,697)
|
Other
Comprehensive income (loss):
|
|
|
|
|
|
|
Foreign
currency translation gain (loss)
|
(2)
|
-
|
1
|
(2)
|
(1)
|
(2)
|
Comprehensive
loss
|
$(3,230)
|
$(16,555)
|
$(905)
|
$(823)
|
$(2,283)
|
$(1,699)
|
|
|
|
|
|
|
|
Net
loss per share:
|
|
|
|
|
|
|
Basic
and diluted
|
$(0.35)
|
$(1.89)
|
$(0.10)
|
$(0.09)
|
$(0.25)
|
$(0.18)
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
Basic
and diluted
|
9,291,421
|
8,782,037
|
9,291,421
|
9,291,421
|
9,291,421
|
9,291,421
|
|
|
|
|
|
|
|
The following summary unaudited
balance sheet data as of June 30, 2019 is
presented:
●
on an actual basis;
and
●
on an as adjusted
basis to give effect to our sale of 2,222,223 shares
of Common Stock in this offering at the assumed offering price of
$9.00 per share, which is the midpoint of the price range set forth
on the cover page of this prospectus, after deducting underwriting
discounts and commissions and estimated offering expenses payable
by us.
The
summary unaudited as adjusted balance sheet is for informational
purposes only and does not purport to indicate balance sheet
information as of any future date.
|
(In
thousands)
|
|
|
|
As
of June 30, 2019
(unaudited)
|
Balance Sheet Data:
|
|
|
Cash
and cash equivalents
|
$5,130
|
$23,380
|
Working capital(2)
|
5,127
|
23,377
|
Total
assets
|
5,595
|
23,845
|
Total
liabilities
|
468
|
468
|
Accumulated
deficit
|
(23,938)
|
(23,938)
|
Total
stockholders’ equity
|
5,127
|
23,377
|
(1) Each $1.00 increase
(decrease) in the assumed public offering price of $9.00 per
share, which is the midpoint of the price range set forth on the
cover page of this prospectus, would increase
(decrease) the as adjusted amount of cash and cash equivalents,
working capital, total assets, and total stockholders’ equity
by approximately $2.1 million, assuming the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. We may also increase or decrease the number
of shares we are offering. Each increase (decrease) of 100,000
shares in the number of shares offered by us would increase
(decrease) the as adjusted amount of cash, cash equivalents and
restricted cash, working capital, total assets, and total
stockholders’ equity by approximately $0.8 million, assuming
that the assumed public offering price remains the same, and after
deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. The as adjusted
information discussed above is illustrative only and will be
adjusted based on the actual public offering price and other terms
of this offering determined at pricing.
(2) Working capital
represents our current assets less our current
liabilities.
|
An
investment in our Common Stock involves a high degree of risk. A
prospective investor should carefully consider the following
information about these risks, together with other information
appearing elsewhere in this prospectus, before deciding to invest
in our Common Stock. The occurrence of any of the following risks
could have a material adverse effect on our business, financial
condition, results of operations and future prospects and
prospective investors could lose all or part of their investment.
The risk factors discussed below and elsewhere in this prospectus
are not exhaustive; other significant risks may exist that are not
identified in this prospectus, but that might still materially and
adversely affect our business, prospects, financial condition, and
results of operations were any of such risks to occur.
Risks Related to Our Financial Condition and Capital
Requirements
We have a limited operating history, expect to incur significant
operating losses, and have a high risk of never being
profitable.
We
commenced operations in December 2014 and have a limited operating
history of less than five years. Therefore, there is limited
historical financial or operational information upon which to
evaluate our performance. Our prospects must be considered in light
of the uncertainties, risks, expenses, and difficulties frequently
encountered by companies in their early stages of operations. Many
if not most companies in our industry at our stage of development
never become profitable and are acquired or go out of business
before successfully developing any product that generates revenue
from commercial sales or enables profitability.
From
inception in December 2014 through June 30, 2019, we have incurred
losses of approximately $23.9 million, which includes $13.5 million
of non-cash in-process research and development, which was incurred
in connection with our acquisition of camsirubicin. We expect to
continue to incur substantial operating losses over the next
several years for the clinical development of our current and
future licensed or purchased product candidates.
The
amount of future losses and when, if ever, we will become
profitable are uncertain. We do not have any products that have
generated any revenues from commercial sales, and do not expect to
generate revenues from the commercial sale of products in the near
future, if ever. Our ability to generate revenue and achieve
profitability will depend on, among other things, successful
completion of the development of our product candidates; obtaining
necessary regulatory approvals from the FDA and international
regulatory agencies; establishing manufacturing, sales, and
marketing arrangements with third parties; obtaining adequate
reimbursement by third-party payers; and raising sufficient funds
to finance our activities. If we are unsuccessful at some or all of
these undertakings, our business, financial condition, and results
of operations are expected to be materially and adversely
affected.
As
a recently established public reporting company, we are subject to
SEC reporting and other requirements, which will lead to increased
operating costs in order to meet these requirements.
If we continue to incur operating losses and fail to obtain the
capital necessary to fund our operations, we will be unable to
advance our development programs, complete our clinical trials, or
bring products to market, or may be forced to reduce or cease
operations entirely. In addition, any capital obtained by us may be
obtained on terms that are unfavorable to us, our investors, or
both.
Developing
a new drug and conducting clinical trials and the regulatory review
processes for one or more disease indications involves substantial
costs. We have projected cash requirements for the near term based
on a variety of assumptions, but some or all of such assumptions
are likely to be incorrect and/or incomplete, possibly materially
in an adverse direction. Our actual cash needs may deviate
materially from those projections, changes in market conditions or
other factors may increase our cash requirements, or we may not be
successful even in raising the amount of cash we currently project
will be required for the near term. We will need to raise
additional capital in the future; the amount of additional capital
needed will vary as a result of a number of factors, including
without limitation the following:
●
receiving
less funding than we require;
●
higher
than expected costs to manufacture our active pharmaceutical
ingredient and our product candidates;
●
higher
than expected costs for preclinical testing;
●
an
increase in the number, size, duration, and/or complexity of our
clinical trials;
●
slower
than expected progress in developing Validive, camsirubicin,
MNPR-101, or other product candidates, including without
limitation, additional costs caused by program delays;
●
higher
than expected costs associated with attempting to obtain regulatory
approvals, including without limitation additional costs caused by
additional regulatory requirements or larger clinical trial
requirements;
●
higher
than expected personnel, consulting or other costs, such as adding
personnel or industry expert consultants or pursuing the
licensing/acquisition of additional assets; and
●
higher
than expected costs to protect our intellectual property portfolio
or otherwise pursue our intellectual property
strategy.
When we attempt to raise additional financing, there can be
no assurance that we will be able to secure such additional
financing in sufficient quantities or at all. We may be unable to
raise additional capital for reasons including, without limitation,
our operational and/or financial performance, investor confidence
in us and the biopharmaceutical industry, credit availability from
banks and other financial institutions, the status of current
projects, and our prospects for obtaining any necessary regulatory
approvals. Potential investors’ capital investments may have
shifted to other opportunities with perceived greater returns
and/or lower risk thereby reducing capital available to us, if
available at all.
In
addition, any additional financing might not be available, and even
if available, may not be available on terms favorable to us or our
then-existing investors. We will seek to raise funds
through public or private equity offerings, debt financings,
corporate collaboration or licensing arrangements, mergers,
acquisitions, sales of intellectual property, or other financing
vehicles or arrangements. To the extent that we raise additional
capital by issuing equity securities or other securities, our
then-existing investors will experience dilution. If we raise funds
through debt financings or bank loans, we may become subject to
restrictive covenants, our assets may be pledged as collateral for
the debt, and the interests of our then-existing investors would be
subordinated to the debt holders or banks. In addition, our use of
and ability to exploit assets pledged as collateral for debt or
loans may be restricted or forfeited. To the extent that we raise
additional funds through collaboration or licensing arrangements,
we may be required to relinquish significant rights (including
without limitation intellectual property rights) to our
technologies or product candidates, or grant licenses on terms that
are not favorable to us. If we are not able to raise needed funding
under acceptable terms or at all, then we will have to reduce
expenses, including the possible options of curtailing operations,
abandoning opportunities, licensing or selling off assets, reducing
costs to a point where clinical development or other progress is
impaired, or ceasing operations entirely.
The funds raised from this offering will not be
sufficient to complete our Phase 3 clinical development of
Validive, which will require that we raise additional
funds. When we raise additional funds in the
future, if at all, to complete our Phase 3 clinical
program for Validive, it may not be at favorable terms. If we are
unable to raise enough funds in the future, we may have to
discontinue or delay our operations.
In
order to be commercially viable, we must successfully research,
develop, obtain regulatory approval for, manufacture, introduce,
market and distribute Validive and, if applicable, any current and
future product candidates we may develop. The estimated required
capital and time-frames necessary to achieve these developmental
milestones as described in this prospectus or as we may state from
time to time is subject to inherent risks, many of which may be
beyond our control. Clinical development of Validive will require
significant funds. Proceeds from this offering are
intended to advance Validive’s Phase 3 clinical
program to the interim results, however,
the amount we raise
in this offering will not be sufficient to fund our Validive Phase
3 clinical program to completion. When
we are required to raise additional funds in the future to be able
to complete our Validive Phase 3 clinical program, it may be on
terms that are unfavorable to us and if we are unable to raise
sufficient funds, we may have to discontinue or delay our
operations.
Unstable market and economic conditions may have serious adverse
consequences on our ability to raise funds, which may cause us to
cease or delay our operations.
From
time to time, global credit and financial markets have experienced
extreme disruptions, including severely diminished liquidity and
credit availability, declines in consumer confidence, declines in
economic growth, increases in unemployment rates, and uncertainty
about economic stability. Our financing strategy may be
adversely affected by any such economic downturn, volatile business
environment and continued unpredictable and unstable market
conditions. If the equity and credit markets
deteriorate, it may make a debt or equity financing more difficult
to complete, costlier, and more dilutive. Failure to secure
any necessary financing in a timely manner and on favorable terms
could have a material adverse effect on our business strategy and
financial performance, and could require us to cease or delay our
operations.
Risks Related to Clinical Development and Regulatory
Approval
We do not have and may never have any approved products on the
market. Our business is highly dependent upon receiving approvals
from various U.S. and international governmental agencies and will
be severely harmed if we are not granted approval to manufacture
and sell our product candidates.
In
order for us to commercialize any treatment for
chemoradiation-induced SOM or for any other disease indication, we
must obtain regulatory approvals of such treatment for that
indication. Satisfying regulatory requirements is an expensive
process that typically takes many years and involves compliance
with requirements covering research and development, testing,
manufacturing, quality control, labeling, and promotion of drugs
for human use. To obtain necessary regulatory approvals, we must,
among other requirements, complete clinical trials demonstrating
that our products are safe and effective for a particular
indication. There can be no assurance that our products will prove
to be safe and effective, that our clinical trials will demonstrate
the necessary safety and effectiveness of our product candidates,
or that we will succeed in obtaining regulatory approval for any
treatment we develop even if such safety and effectiveness are
demonstrated.
Any
delays or difficulties we encounter in our clinical trials may
delay or preclude regulatory approval from the FDA or from
international regulatory organizations. Any delay or preclusion of
regulatory approval would be expected to delay or preclude the
commercialization of our products. Examples of delays or
difficulties that we may encounter in our clinical trials include
without limitation the following:
●
Clinical
trials may not yield sufficiently conclusive results for regulatory
agencies to approve the use of our products.
●
Our
products may fail to be more effective than current therapies, or
to be effective at all.
●
We
may discover that our products have adverse side effects, which
could cause our products to be delayed or precluded from receiving
regulatory approval or otherwise expose us to significant
commercial and legal risks.
●
It
may take longer than expected to determine whether or not a
treatment is effective.
●
Patients
involved in our clinical trials may suffer severe adverse side
effects even up to death, whether as a result of treatment with our
products, the withholding of such treatment, or other reasons
(whether within or outside of our control).
●
We
may fail to be able to enroll a sufficient number of patients in
our clinical trials.
●
Patients
enrolled in our clinical trials may not have the characteristics
necessary to obtain regulatory approval for a particular indication
or patient population.
●
We
may be unable to produce sufficient quantities of product to
complete the clinical trials.
●
Even
if we are successful in our clinical trials, any required
governmental approvals may still not be obtained or, if obtained,
may not be maintained.
●
If
approval for commercialization is granted, it is possible the
authorized use will be more limited than is necessary for
commercial success, or that approval may be conditioned on
completion of further clinical trials or other activities, which
will cause a substantial increase in costs and which we might not
succeed in performing or completing.
●
If
granted, approval may be withdrawn or limited if problems with our
products emerge or are suggested by the data arising from their use
or if there is a change in law or regulation.
Any
success we may achieve at a given stage of our clinical trials does
not guarantee that we will achieve success at any subsequent stage,
including without limitation final FDA approval.
We
may encounter delays or rejections in the regulatory approval
process because of additional government regulation resulting from
future legislation or administrative action, or from changes in the
policies of the FDA or other regulatory bodies during the period of
product development, clinical trials, or regulatory review. Failure
to comply with applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of
products, total or partial suspension of production, or an
injunction preventing certain activity, as well as other regulatory
action against our product candidates or us. As a company, we have
no experience in successfully obtaining regulatory approval for a
product and thus may be poorly equipped to gauge, and may prove
unable to manage, risks relating to obtaining such
approval.
Outside
the U.S., our ability to market a product is contingent upon
receiving clearances from appropriate non-U.S. regulatory
authorities. Non-U.S. regulatory approval typically includes all of
the risks associated with FDA clearance discussed above as well as
geopolitical uncertainties and the additional uncertainties and
potential prejudices faced by U.S. pharmaceutical companies
conducting business abroad. In certain cases, pricing restrictions
and practices can make achieving even limited profitability very
difficult.
Even if we complete the clinical trials we discussed with the FDA,
there is no guarantee that at the time of submission the FDA will
accept our new drug application (“NDA”).
The
FDA provided helpful guidance on our proposed Validive adaptive
design trial and confirmatory second trial, informing us it might
be an acceptable pathway for NDA submission, but the FDA is not
bound by the guidance they give, and can change their position in
the future. Any future decision by the FDA will be driven largely
by the data generated from the Validive clinical
trials.
As a company, we have never completed a clinical trial and have
limited experience in completing regulatory filings and any delays
in regulatory filings could materially affect our financial
condition.
While
members of our team have conducted numerous clinical trials at
previous companies, and have launched and marketed innovative
pharmaceutical products in the US and internationally, as a
company, we have not yet completed any clinical trials of our
product candidates, nor have we demonstrated the ability to obtain
marketing approvals, manufacture product candidates at a commercial
scale, or conduct sales and marketing activities necessary for the
successful commercialization of a product. Consequently, we have no
historical basis as a company by which one can evaluate or predict
reliably our future success or viability.
Additionally,
while our team has experience at prior companies with regulatory
filings, as a company, we have limited experience with regulatory
filings with agencies such as the FDA or EMA. Any delay in our
regulatory filings for our product candidates, and any adverse
development or perceived adverse development with respect to the
applicable regulatory authority’s review of such filings,
including, without limitation, the FDA’s issuance of a
“refuse to file” letter or a request for additional
information, could materially affect our financial
condition.
We may seek fast track designation for one or more of our current
and future product candidates, but we might not receive such
designation, and even if we do, such designation may not actually
lead to a faster development or regulatory review or approval
process.
Our
lead product candidate, Validive, has been given fast track
designation from the FDA. Fast track designation does not ensure
that we will receive marketing approval or that approval will be
granted within any particular timeframe. We may not experience a
faster development, regulatory review or approval process with fast
track designation compared to conventional FDA procedures.
Additionally, the FDA may withdraw fast track designation, for
reasons such as it comes to believe a drug candidate no longer
adequately addresses an unmet medical need. Fast track designation
alone does not guarantee qualification for the FDA’s priority
review procedures. If we seek fast track designation for other
product candidates, we may not receive such a designation from the
FDA.
We, or any future collaborators, may not be able to obtain and
maintain orphan drug exclusivity for our product candidates in the
U.S. and Europe.
Validive
has been granted orphan drug designation for the treatment of SOM
in the EU. Camsirubicin has been granted orphan drug designation
for the treatment of soft tissue sarcoma in the U.S. and has
received a positive opinion recommending orphan drug designation in
the EU. We may seek additional orphan drug designations or
regulatory incentives for our pipeline product candidates, for
other indications or for future product candidates. There can be no
assurances that we will be able to obtain such
designations.
Even
if we obtain orphan drug designation for a product candidate, we
may not be able to maintain orphan drug exclusivity for that drug.
For example, orphan drug designation may be removed if the
prevalence of an indication increases beyond the patient number
limit required to maintain designation. Generally, if a drug with
an orphan drug designation subsequently receives the first
marketing approval for the indication for which it has such
designation, the drug is entitled to a period of marketing
exclusivity, which precludes the EMA or the FDA from approving
another marketing application for the same product in the same
indication for that time period. Orphan drug exclusivity may be
lost if the FDA or EMA determines that the request for designation
was materially defective or if the manufacturer is unable to assure
sufficient quantity of the product to meet the needs of patients
with the rare disease or condition. Moreover, even after an orphan
drug is approved, the FDA can subsequently approve a different drug
for the same condition if the FDA concludes that the later drug is
clinically superior in that it is shown to be safer, more effective
or makes a major contribution to patient care compared to our
product.
The
FDA may reevaluate the Orphan Drug Act and its regulations and
policies, and similarly the EMA may reevaluate its policies and
regulations. We do not know if, when, or how the FDA or EMA may
change their orphan drug regulations and policies in the future,
and it is uncertain how any changes might affect our business.
Depending on what changes the FDA and/or EMA may make to their
orphan drug regulations and policies, our business could be
adversely impacted.
If serious adverse or undesirable side effects are identified
during the development of our product candidates, we may abandon or
limit our development or commercialization of such product
candidates.
If
our product candidates are associated with undesirable side effects
or have unexpected characteristics, we may need to abandon their
development or limit development to certain uses or subpopulations
in which the undesirable side effects or other characteristics are
less prevalent, less severe or more acceptable from a risk-benefit
perspective.
If
we elect or are forced to suspend or terminate any clinical trial
with one of our product candidates, the commercial prospects of
such product candidate will be harmed, and our ability to generate
revenue from such product candidate will be delayed or eliminated.
Any of these occurrences may harm our business, financial condition
and prospects significantly.
With
regard to our lead product candidate, Validive, unforeseen side
effects from Validive could arise either during clinical
development or, if approved, after Validive has been marketed. This
could cause regulatory approvals for, or market acceptance of,
Validive harder and costlier to obtain.
To
date, no difference in the frequency of serious adverse events
(“SAEs”) has been observed in patients treated with
Validive compared to placebo. In the Phase 2 clinical trial, two
patients in the placebo group and 2 patients in the Validive 50
µg group experienced SAEs that were assessed as treatment
related. No patients in the Validive treated cohorts were
discontinued due to study drug. Clonidine, the active ingredient of
Validive, has been used for over 50 years as an orally swallowed
systemic treatment for high blood pressure. Validive administration
leads to very low, but still detectable exposure of clonidine
outside the oral cavity. Thus, there is some risk that patients may
experience side effects due to this systemic exposure, which could
include a reduction in blood pressure, irregular heartbeat,
drowsiness or dry mouth.
The
results of our planned or any future clinical trials may show that
the side effects of Validive are unacceptable or intolerable, which
could interrupt, delay or halt clinical trials, and result in delay
of, or failure to obtain, marketing approval from the FDA or EMA
and other regulatory authorities, or result in marketing approval
from the FDA or EMA and other regulatory authorities with
restrictive label warnings.
If
Validive receives marketing approval and we or others later
identify undesirable or unacceptable side effects caused by the use
of Validive:
●
regulatory
authorities may withdraw their approval of the product, which would
force us to remove Validive from the market;
●
regulatory
authorities may require the addition of labeling statements,
specific warnings, a contraindication, or field alerts to
physicians and pharmacies;
●
we
may be required to change instructions regarding the way the
product is administered, conduct additional clinical trials or
change the labeling of the product;
●
we
may be subject to limitations on how we may promote the
product;
●
sales
of the product may decrease significantly;
●
we
may be subject to litigation or product liability claims;
and
●
our
reputation may suffer.
Any
of these events could prevent us or our potential future
collaborators from achieving or maintaining market acceptance of
Validive and/or could substantially increase commercialization
costs and expenses, which in turn could delay or prevent us from
generating significant revenues from the sale of
Validive.
Our Phase 3 development program for Validive entails significant
risk.
The
Phase 3 development program for Validive has been designed based on
an analysis of the 64 oropharyngeal cancer (“OPC”)
patients included in the Phase 2 trial (n= 24 in the placebo group,
n= 21 Validive 50 µg group, and n= 19 Validive 100 µg
group). While a dose response was observed in the Validive treated
OPC cohorts compared to placebo across multiple clinically
meaningful endpoints, the ability to establish statistical
significance was limited by the relatively small sample size. This
increases the risk of the Phase 3 trials. Given the large unmet
medical need for the prevention of radiotherapy-induced SOM in OPC
patients, we have decided to pursue an adaptive design Phase 3
clinical development strategy in an effort to mitigate this risk.
Our adaptive design approach will allow us to confirm or reject our
hypothesis based off the Phase 2 data that the optimal patient
population for Validive is likely either all OPC patients or HPV+
OPC patients, and then run a confirmatory second trial should it be
warranted.
If we experience delays or difficulties in the enrollment of
subjects to our clinical trials, our receipt of necessary
regulatory approvals could be delayed or prevented, which could
materially affect our financial condition.
Identifying,
screening and enrolling patients to participate in clinical trials
of our product candidates is critical to our success, and we may
not be able to identify, recruit, enroll and dose a sufficient
number of patients with the required or desired characteristics to
complete our clinical trials in a timely manner. The timing of our
clinical trials depends on our ability to recruit patients to
participate as well as to subsequently dose these patients and
complete required follow-up periods. In particular, because our
planned clinical trials of Validive and camsirubicin are focused on
indications with relatively small patient populations, our ability
to enroll eligible patients may be limited or may result in slower
enrollment than we anticipate.
In
addition, we may experience enrollment delays related to increased
or unforeseen regulatory, legal and logistical requirements at
certain clinical trial sites. These delays could be caused by
reviews by regulatory authorities and contractual discussions with
individual clinical trial sites. Any delays in enrolling and/or
dosing patients in our planned clinical trials could result in
increased costs, delays in advancing our product candidates, delays
in testing the effectiveness of our product candidates or in
termination of the clinical trials altogether.
Patient
enrollment may be affected if our competitors have ongoing clinical
trials with products for the same indications as our product
candidates, and patients who would otherwise be eligible for our
clinical trials instead enroll in our competitors’ clinical
trials. Patient enrollment may also be affected by other factors,
including:
●
coordination
with clinical research organizations to enroll and administer the
clinical trials;
●
coordination
and recruitment of collaborators and investigators at individual
sites;
●
size
of the patient population and process for identifying
patients;
●
design
of the clinical trial protocol;
●
eligibility
and exclusion criteria;
●
perceived
risks and benefits of the product candidates under
study;
●
availability
of competing commercially available therapies and other competing
products’ clinical trials;
●
time
of year in which the trials are initiated or
conducted;
●
severity
of the diseases under investigation;
●
ability
to obtain and maintain subject consents;
●
ability
to enroll and treat patients in a timely manner;
●
risk
that enrolled subjects will drop out before completion of the
trials;
●
proximity
and availability of clinical trial sites for prospective
patients;
●
ability
to monitor subjects adequately during and after treatment;
and
●
patient
referral practices of physicians.
Our
inability to enroll a sufficient number of patients for clinical
trials would result in significant delays and could require us to
abandon one or more clinical trials altogether. Enrollment delays
in these clinical trials may result in increased development costs
for our product candidates, which could materially affect our
financial condition.
If we or our licensees, development collaborators, or suppliers are
unable to manufacture our products in sufficient quantities or at
defined quality specifications, or are unable to obtain regulatory
approvals for the manufacturing facility, we may be unable to
develop and/or meet demand for our products and lose time to market
and potential revenues.
Completion
of our clinical trials and commercialization of our product
candidates require access to, or development of, facilities to
manufacture a sufficient supply of our product candidates. We will
utilize third parties to manufacture Validive, camsirubicin, and
MNPR-101. We currently have manufacturing agreements in place for
Validive and MNPR-101. We are in negotiations with manufacturers
for camsirubicin.
In
the future we may become unable, for various reasons, to rely on
our sources for the manufacture of our product candidates, either
for clinical trials or, at some future date, for commercial
distribution. We may not be successful in identifying additional or
replacement third-party manufacturers, or in negotiating acceptable
terms with any we do identify. We may face competition for access
to these manufacturers’ facilities and may be subject to
manufacturing delays if the manufacturers give other clients higher
priority than they give to us. Even if we are able to identify an
additional or replacement third-party manufacturer, the delays and
costs associated with establishing and maintaining a relationship
with such manufacturer may have a material adverse effect on
us.
Before
we can begin to commercially manufacture Validive, camsirubicin,
MNPR-101, or any other product candidate, we must obtain regulatory
approval of the manufacturing facility and process. Manufacturing
of drugs for clinical and commercial purposes must comply with
current Good Manufacturing Practices requirements, commonly known
as “cGMP.” The cGMP requirements govern quality control
and documentation policies and procedures. Complying with cGMP and
non-U.S. regulatory requirements will require that we expend time,
money, and effort in production, recordkeeping, and quality control
to ensure that the product meets applicable specifications and
other requirements. We, or our contracted manufacturing facility,
must also pass a pre-approval inspection prior to FDA approval.
Failure to pass a pre-approval inspection may significantly delay
or prevent FDA approval of our products. If we fail to comply with
these requirements, we would be subject to possible regulatory
action and may be limited in the jurisdictions in which we are
permitted to sell our products and will lose time to market and
potential revenues.
It is uncertain whether product liability insurance will be
adequate to address product liability claims, or that insurance
against such claims will be affordable or available on acceptable
terms in the future.
Clinical
research involves the testing of new drugs on human volunteers
pursuant to a clinical trial protocol. Such testing involves a risk
of liability for personal injury to or death of patients due to,
among other causes, adverse side effects, improper administration
of the new drug, or improper volunteer behavior. Claims may arise
from patients, clinical trial volunteers, consumers, physicians,
hospitals, companies, institutions, researchers, or others using,
selling, or buying our products, as well as from governmental
bodies. In addition, product liability and related risks are likely
to increase over time, in particular upon the commercialization or
marketing of any products by us or parties with which we enter into
development, marketing, or distribution collaborations. Although we
are contracting for general liability insurance in connection with
our ongoing business, there can be no assurance that the amount and
scope of such insurance coverage will be appropriate and sufficient
in the event any claims arise, that we will be able to secure
additional coverage should we attempt to do so, or that our
insurers would not contest or refuse any attempt by us to collect
on such insurance policies. Furthermore, there can be no assurance
that suitable product liability insurance (at the clinical stage
and/or commercial stage) will continue to be available on terms
acceptable to us or at all, or that, if obtained, the insurance
coverage will be appropriate and sufficient to cover any potential
claims or liabilities.
If the market opportunities for our current and potential future
drug candidates are smaller than we believe they are, our ability
to generate product revenues may be adversely affected and our
business may suffer.
Our understanding of the number of people who suffer from SOM
resulting from chemoradiotherapy for the treatment of OPC, whom
Validive may have the potential to treat, is based upon estimates.
These estimates may prove to be incorrect, and new studies may
demonstrate or suggest a lower estimated incidence or prevalence of
this condition. The number of patients in the U.S. or elsewhere may
turn out to be lower than expected, may not be otherwise amenable
to Validive treatment, or treatment-amenable patients may become
increasingly difficult to identify and access, all of which would
adversely affect our business prospects and financial condition. In
particular, the treatable population for Validive may further be
reduced if our estimates of addressable populations are erroneous
or sub-populations of patients do not derive benefit from
Validive.
Risks Related to Our Reliance on Third Parties
Corporate, non-profit, and academic collaborators may take actions
(including lack of effective actions) to delay, prevent, or
undermine the success of our products.
Our
operating and financial strategy for the development, clinical
testing, manufacture, and commercialization of product candidates
is heavily dependent on us entering into collaborations with
corporations, non-profit organizations, academic institutions,
licensors, licensees, and other parties. There can be no assurance
that we will be successful in establishing such collaborations.
Current and future collaborations are and may be terminable at the
sole discretion of the collaborator. The activities of any
collaborator will not be within our direct control and may not be
in our power to influence. There can be no assurance that any
collaborator will perform its obligations to our satisfaction or at
all; that we will derive any revenue, profits, or benefit from such
collaborations; or that any collaborator will not compete with us.
If any collaboration is not pursued, we may require substantially
greater capital to undertake development and commercialization of
our proposed products, and may not be able to develop and
commercialize such products effectively, if at all. In addition, a
lack of development and commercialization collaborations may lead
to significant delays in introducing proposed products into certain
markets and/or reduced sales of proposed products in such markets.
Furthermore, current and future collaborators may act deliberately
or inadvertently in ways detrimental to our interests.
The termination of third-party licenses could adversely affect our
rights to important compounds or technologies.
We
have exercised our option to license Validive; as such, Onxeo has
the ability to terminate the license if we breach our obligations
under the license agreement. A termination of the license agreement
might force us to cease developing and/or selling Validive, if it
gets to market. We rely on certain rights to MNPR-101 that we have
secured through a non-exclusive license agreement with XOMA. XOMA,
as licensor, has the ability to terminate the license if we breach
our obligations under the license agreement and do not remedy any
such breach within a set time after receiving written notice of
such breach from XOMA. A termination of the license agreement might
force us to cease developing and/or selling MNPR-101, if it gets to
market.
Data provided by collaborators and other parties upon which we rely
have not been independently verified and could turn out to be
inaccurate, misleading, or incomplete.
We
rely on third-party vendors, scientists, and collaborators to
provide us with significant data and other information related to
our projects, clinical trials, and business. We do not
independently verify or audit all of such data (including possibly
material portions thereof). As a result, such data may be
inaccurate, misleading, or incomplete.
In certain cases, we may need to rely on a single supplier for a
particular manufacturing material or service, and any interruption
in or termination of service by such supplier could delay or
disrupt the commercialization of our products.
We
rely on third-party suppliers for the materials used to manufacture
our compounds. Some of these materials may at times only be
available from one supplier. Any interruption in or termination of
service by such single source suppliers could result in a delay or
disruption in manufacturing until we locate an alternative source
of supply. There can be no assurance that we would be successful in
locating an alternative source of supply or in negotiating
acceptable terms with such prospective supplier.
Our Validive manufacturer is in the United Kingdom
(“UK”), and it is unknown how they will be impacted by
Brexit; however, if they are negatively impacted, this could
increase our manufacturing costs and adversely impact our financial
condition.
The
UK’s referendum to leave the EU or “Brexit,” has
caused and may continue to cause disruptions to capital and
currency markets worldwide. The full impact of the
Brexit decision, however, remains uncertain. A process
of negotiation will determine the future terms of the UK’s
relationship with the EU. During this period of negotiation
and afterwards, our Validive manufacturer may be negatively
affected by interest rate, exchange rate and other market and
economic volatility, as well as regulatory and political
uncertainty. The tax consequences of the UK’s
withdrawal from the EU are uncertain as well. If Brexit
has a detrimental effect on our Validive manufacturer, it could, in
turn, adversely impact our manufacturing costs and financial
condition.
We rely on third parties to conduct our non-clinical studies and
our clinical trials. If these third parties do not successfully
carry out their contractual duties or meet expected deadlines, we
may be unable to obtain regulatory approval for or commercialize
our current product candidates or any future products, on a timely
basis or at all, and our financial condition will be adversely
affected.
We
do not have the ability to independently conduct non-clinical
studies and clinical trials. We rely on medical institutions,
clinical investigators, contract laboratories, collaborative
partners and other third parties, such as contract research
organizations or clinical research organizations, to conduct
non-clinical studies and clinical trials on our product candidates.
The third parties with whom we contract for execution of our
non-clinical studies and clinical trials play a significant role in
the conduct of these studies and trials and the subsequent
collection and analysis of data. However, these third parties are
not our employees, and except for contractual duties and
obligations, we have limited ability to control the amount or
timing of resources that they devote to our programs.
Although
we rely on third parties to conduct our non-clinical studies and
clinical trials, we remain responsible for ensuring that each of
our non-clinical studies and clinical trials is conducted in
accordance with its investigational plan and protocol. Moreover,
the FDA, EMA and other foreign regulatory authorities require us to
comply with regulations and standards, including some regulations
commonly referred to as good clinical practices
(“GCPs”), for conducting, monitoring, recording and
reporting the results of clinical trials to ensure that the data
and results are scientifically credible and accurate, and that the
trial subjects are adequately informed of the potential risks of
participating in clinical trials.
In
addition, the execution of non-clinical studies and clinical
trials, and the subsequent compilation and analyses of the data
produced, requires coordination among various parties. In order for
these functions to be carried out effectively and efficiently, it
is imperative that these parties communicate and coordinate with
one another. Moreover, these third parties may also have
relationships with other commercial entities, some of which may
compete with us. Under certain circumstances, these third parties
may be able to terminate their agreements with us upon short
notice. If the third parties conducting our clinical trials do not
perform their contractual duties or obligations, experience work
stoppages, do not meet expected deadlines, terminate their
agreements with us or need to be replaced, or if the quality or
accuracy of the clinical data they obtain is compromised due to the
failure to adhere to our clinical trial protocols or GCPs, or for
any other reason, we may need to enter into new arrangements with
alternative third parties, which could be difficult, costly or
impossible, and our clinical trials may be extended, delayed or
terminated or may need to be repeated. If any of the foregoing were
to occur, we may not be able to obtain, on a timely basis or at
all, regulatory approval for or to commercialize the product
candidate being tested in such trials, and as a result, our
financial condition will be adversely affected.
Risks Related to Commercialization of Our Product
Candidates
We have no experience as a company in commercializing any product.
If we fail to obtain commercial expertise, upon product approval by
regulatory agencies, our product launch and revenues could be
delayed.
As
a company, we have never obtained regulatory approval for, or
commercialized, any product. Accordingly, we have not yet begun to
build out any sales or marketing capabilities. If we are unable to
establish effective sales and marketing capabilities, or if we are
unable to enter into agreements with third parties to commercialize
our product candidates on favorable terms or on any reasonable
terms at all, we may not be able to effectively generate product
revenues once our product candidates are approved for marketing. If
we fail to obtain commercial expertise, upon drug approval, our
product launch and subsequent revenues could be delayed and /or
fail to reach their commercial potential.
Our product development efforts are at an early stage. We have not
yet undertaken any marketing efforts, and there can be no assurance
that future anticipated market testing and analyses will validate
our marketing strategy. We may need to modify the products, or we
may not be successful in either developing or marketing those
products.
As
a company, we have not completed the development or clinical trials
of any product candidates and, accordingly, have not yet begun to
market or generate revenue from the commercialization of any
products. Obtaining approvals of these product candidates will
require substantial additional research and development as well as
costly clinical trials. There can be no assurance that we will
successfully complete development of our product candidates or
successfully market them. We may encounter problems and delays
relating to research and development, regulatory approval,
intellectual property rights of product candidates, or other
factors. There can be no assurance that our development programs
will be successful, that our product candidates will prove to be
safe and effective in or after clinical trials, that the necessary
regulatory approvals for any product candidates will be obtained,
or, even if obtained, will be as broad as sought or will be
maintained for any period thereafter, that patents will issue on
our patent applications, that any intellectual property protections
we secure will be adequate, or that our collaboration arrangements
will not diminish the value of our intellectual property through
licensing or other arrangements. Furthermore, there can be no
assurance that any product we might market will be received
favorably by customers (whether physicians, payers, patients, or
all three), adequately reimbursed by third-party payers, or that
competitive products will not perform better and/or be marketed
more successfully. Additionally, there can be no assurances that
any future market testing and analyses will validate our marketing
strategies. We may need to seek to modify the product labels
through additional studies in order to be able to market them
successfully to reach their commercial potential.
If we are unable to establish relationships with licensees or
collaborators to carry out sales, marketing, and distribution
functions or to create effective marketing, sales, and distribution
capabilities, we will be unable to market our products
successfully.
Our
business strategy may include out-licensing product candidates to
or collaborating with larger firms with experience in marketing and
selling pharmaceutical products. There can be no assurance that we
will successfully be able to establish marketing, sales, or
distribution relationships with any third-party, that such
relationships, if established, will be successful, or that we will
be successful in gaining market acceptance for any products we
might develop. To the extent that we enter into any marketing,
sales, or distribution arrangements with third parties, our product
revenues per unit sold are expected to be lower than if we
marketed, sold, and distributed our products directly, and any
revenues we receive will depend upon the efforts of such third
parties.
If
we are unable to establish such third-party marketing and sales
relationships, or choose not to do so, we would have to establish
in-house marketing and sales capabilities. We have no experience in
marketing or selling oncology pharmaceutical products, and
currently have no marketing, sales, or distribution infrastructure
and no experience developing or managing such infrastructure for an
oncology related product. To market any products directly, we would
have to establish a marketing, sales, and distribution force that
has technical expertise and could support a distribution
capability. Competition in the biopharmaceutical industry for
technically proficient marketing, sales, and distribution personnel
is intense and attracting and retaining such personnel may
significantly increase our costs. There can be no assurance that we
will be able to establish internal marketing, sales, or
distribution capabilities or that these capabilities will be
sufficient to meet our needs.
Commercial success of our product candidates will depend on the
acceptance of these products by physicians, payers, and
patients.
Any
product candidate that we may develop may not gain market
acceptance among physicians and patients. Market acceptance of and
demand for any product that we may develop will depend on many
factors, including without limitation:
●
Comparative
superiority of the effectiveness and safety in the treatment of the
disease indication compared to alternative treatments;
●
Less
prevalence and severity of adverse side effects;
●
Potential
advantages over alternative treatments;
●
Convenience
and ease of administration;
●
Sufficient
third-party coverage and/or reimbursement;
●
Strength
of sales, marketing and distribution support; and
●
Our
ability to provide acceptable evidence of safety and
efficacy.
If
any product candidate developed by us receives regulatory approval
but does not achieve an adequate level of market acceptance by
physicians, payers, and patients, we may generate insufficient,
little, or no product revenue and may not become
profitable.
Our products may not be accepted for reimbursement or properly
reimbursed by third-party payers.
The
successful commercialization of any products we might develop will
depend substantially on whether the costs of our products and
related treatments are reimbursed at acceptable levels by
government authorities, private healthcare insurers, and other
third-party payers, such as health maintenance organizations.
Reimbursement rates may vary, depending upon the third-party payer,
the type of insurance plan, and other similar or dissimilar
factors. If our products do not achieve adequate reimbursement,
then the number of physician prescriptions of our products may not
be sufficient to make our products profitable.
Comparative
effectiveness research demonstrating benefits of a
competitor’s product could adversely affect the sales of our
product candidates. If third-party payers do not consider our
products to be cost-effective compared to other available
therapies, they may not cover our products as a benefit under their
plans or, if they do, the level of payment may not be sufficient to
allow us to sell our products on a profitable basis.
Adequate
third-party reimbursement may not be available to enable us to
maintain price levels sufficient to realize an appropriate return
on our investment in the product development of that product. In
addition, in the U.S. there is a growing emphasis on comparative
effectiveness research, both by private payers and by government
agencies. To the extent other drugs or therapies are found to be
more effective than our products, payers may elect to cover such
therapies in lieu of our products or reimburse our products at a
lower rate.
The effects of economic and political pressure to lower
pharmaceutical prices are a major threat to the economic viability
of new research-based pharmaceutical products, and any development
along these lines could materially and adversely affect our
prospects.
Emphasis
on managed care in the U.S. has increased and we expect this will
continue to increase the pressure on pharmaceutical pricing.
Coverage policies and third-party reimbursement rates may change at
any time. Even if favorable coverage and reimbursement status is
attained for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates
may be implemented in the future.
Any
development along these lines could materially and adversely affect
our prospects. We are unable to predict what legislative or
regulatory changes relating to the healthcare industry, including
without limitation any changes affecting governmental and/or
private or third-party coverage and reimbursement, may be enacted
in the future, or what effect such legislative or regulatory
changes would have on our business.
If we obtain FDA approval for any of our product candidates, we
will be subject to various federal and state fraud and abuse laws;
these laws may impact, among other things, our proposed sales,
marketing and education programs. Fraud and abuse laws are expected
to increase in breadth and in detail, which will likely increase
our operating costs and the complexity of our programs to insure
compliance with such enhanced laws.
If
we obtain FDA approval for any of our product candidates and begin
commercializing those products in the U.S., our operations may be
directly, or indirectly through our customers, distributors, or
other business partners, subject to various federal and state fraud
and abuse laws, including, without limitation, anti-kickback
statutes and false claims statutes which may increase our operating
costs. These laws may impact, among other things, our proposed
sales, marketing and education programs. In addition, we may be
subject to data privacy and security regulation by both the federal
government and the states in which we conduct
business.
If our operations are found to be in violation of any of the
federal and state fraud and abuse laws or any other governmental
regulations that apply to us, we may be subject to criminal actions
and significant civil monetary penalties, which would adversely
affect our ability to operate our business and our results of
operations.
If
our operations are found to be in violation of any of the federal
and state fraud and abuse laws, including, without limitation,
anti-kickback statutes and false claims statutes or any other
governmental regulations that apply to us, we may be subject to
penalties, including criminal and significant civil monetary
penalties, damages, fines, imprisonment, exclusion from
participation in government healthcare programs, and the
curtailment or restructuring of our operations, any of which could
adversely affect our ability to operate our business and our
results of operations. To the extent that any of our product
candidates are ultimately sold in a foreign country, we may be
subject to similar foreign laws and regulations, which may include,
for instance, applicable post-marketing requirements, including
safety surveillance, anti-fraud and abuse laws, and implementation
of corporate compliance programs and reporting of payments or
transfers of value to healthcare professionals.
Negotiated prices for our products covered by a Part D prescription
drug plan and other government programs will likely be lower than
the prices we might otherwise obtain.
Government
payment for some of the costs of prescription drugs may increase
demand for our products for which we receive marketing approval;
however, any negotiated prices for our products covered by a Part D
prescription drug plan and other government programs will likely be
lower than the prices we might otherwise obtain.
Risks
Related to Our Intellectual Property
If we and our third-party licensors do not obtain and preserve
protection for our respective intellectual property rights, our
competitors may be able to take advantage of our (and our
licensors’) development efforts to develop competing
drugs.
Our
commercial success will depend in part on obtaining patent
protection for any products and other technologies we might
develop, and successfully defending any patents we obtain against
third-party challenges. We have licensed all intellectual property
related to Validive from Onxeo S.A., a French public company. See
“Business - Partnerships, Licensing and Acquisition”.
The assignment and transfer of the camsirubicin (formerly GPX-150) patent
portfolio from TacticGem, LLC (“TacticGem”) to us has
been completed. We filed and have been granted in the U.S. and
various countries around the world patents for antibodies that
target uPAR for our MNPR-101 program. We have also been granted in
the U.S. and various countries around the world patents to a
specific sequence of amino acids on uPAR, to which our MNPR-101
antibody binds. We are currently prosecuting this patent in other
countries around the world to further protect MNPR-101. The patent
process is subject to numerous risks and uncertainties, and there
can be no assurance that we will be successful in obtaining and
defending patents. See “Business - Intellectual Property
Portfolio and Exclusivity”. These risks and uncertainties
include without limitation the following:
●
Patents that may be
issued or licensed may be challenged, invalidated, or circumvented;
or may not provide any competitive advantage for other
reasons.
●
Our licensors may
terminate or breach our existing or future license agreements,
thereby reducing or preventing our ability to exclude competition;
termination of such license agreements may also subject us to risk
of patent infringement of patents to which we no longer have a
license.
●
Our competitors,
many of which have substantially greater resources than us and have
made significant investments in competing technologies, may seek,
or may already have obtained, patents that will limit, interfere
with, or eliminate our ability to make, use, and sell our potential
products either in the U.S. or in international
markets.
●
As a matter of
public policy regarding worldwide health concerns, there may be
significant pressure on the U.S. government and other international
governmental bodies to limit the scope of domestic and
international patent protection for cancer treatments that prove
successful.
●
Countries other
than the U.S. may have less restrictive patent laws than those
upheld by the U.S. courts; therefore, non-U.S. competitors could
exploit these laws to create, develop, and market competing
products. In some countries, the legal compliance with
pharmaceutical patents, patent applications and other intellectual
property regulations is very weak or actively evaded in some cases
with government aid.
In
addition, the U.S. Patent and Trademark Office
(“USPTO”) and patent offices in other jurisdictions
have often required that patent applications concerning
pharmaceutical and/or biotechnology-related inventions be limited
or narrowed substantially to cover only the specific innovations
exemplified in the patent application, thereby limiting their scope
of protection against competitive challenges. Thus, even if we or
our licensors are able to obtain patents, the patents may be
substantially narrower than anticipated.
If we
permit our patents to lapse or expire, we will not be protected and
will have less of a competitive advantage. The value of our
products may be greatly reduced if this occurs. Our patents expire
at different times and are subject to the laws of multiple
countries. Some of our patents are currently near expiration and we
may pursue patent term extensions for these where appropriate. See
“Business - Intellectual Property Portfolio and
Exclusivity”.
In
addition to patents, we also rely on trade secrets and proprietary
know-how. While we take measures to protect this information by
entering into confidentiality and invention agreements with our
consultants and collaborators, we cannot provide any assurances
that these agreements will be fully enforceable and will not be
breached, that we will be able to protect ourselves from the
harmful effects of disclosure if they are not fully enforceable or
are breached, that any remedy for a breach will adequately
compensate us, that these agreements will achieve their intended
aims, or that our trade secrets will not otherwise become known or
be independently discovered by competitors. If any of these events
for which we cannot provide assurances occurs, or we otherwise lose
protection for our trade secrets or proprietary know-how, the value
of this information may be greatly reduced.
The patent protection we obtain and preserve for our product
candidates may not be sufficient enough to provide us with any
competitive advantage.
We may
be subject to competition despite the existence of intellectual
property we license or own. We can give no assurances that our
intellectual property claims will be sufficient to prevent third
parties from designing around patents we own or license and
developing and commercializing competitive products. The existence
of competitive products that avoid our intellectual property could
materially adversely affect our operating results and financial
condition. Furthermore, limitations, or perceived limitations, in
our intellectual property may limit the interest of third parties
to partner, collaborate or otherwise transact with us, if third
parties perceive a higher than acceptable risk to commercialization
of our products or future products. When looking at our Validive
patents’ ability to block competition, the protection offered
by our patents may be, to some extent, more limited than the
protection provided by patents claiming the composition of matter
of entirely new chemical structures previously unknown. If a
competitor were able to successfully design around any method of
use and formulation patents we may have now or in the future, our
business and competitive advantage could be adversely
affected.
Patent terms may be inadequate to protect our competitive position
on our product candidates for an adequate amount of
time.
Patents
have a limited lifespan. In the U.S., if all maintenance fees are
timely paid, the natural expiration of a patent is generally 20
years from its earliest U.S. non-provisional filing date. Various
extensions may be available, but the life of a patent, and the
protection it affords, is limited. Even if patents covering our
product candidates are obtained, once the patent life has expired
for a product candidate, we may be open to competition from
competitive medications, including generic medications. Given the
amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such product
candidates might expire before or shortly after such product
candidates are commercialized. As a result, our owned and licensed
patent portfolio may not provide us with sufficient rights to
exclude others from commercializing product candidates similar or
identical to ours.
Depending upon the
timing, duration and conditions of any FDA marketing approval of
our product candidates, one or more of our U.S. patents may be
eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Act of 1984, referred to as
the Hatch-Waxman Amendments, and similar legislation in the
European Union. The Hatch-Waxman Amendments permit a patent term
extension of up to five years for a patent covering an approved
product as compensation for effective patent term lost during
product development and the FDA regulatory review process. However,
we may not receive an extension if we fail to exercise due
diligence during the testing phase or regulatory review process,
fail to apply within applicable deadlines, fail to apply prior to
expiration of relevant patents or otherwise fail to satisfy
applicable requirements. Moreover, the length of the extension
could be less than we request. Only one patent per approved product
can be extended, the extension cannot extend the total patent term
beyond 14 years from approval and only those claims covering the
approved drug, a method for using it or a method for manufacturing
it may be extended. If we are unable to obtain patent term
extension or the term of any such extension is less than we
request, the period during which we can enforce our patent rights
for the applicable product candidate will be shortened and our
competitors may obtain approval to market competing products
sooner. As a result, our revenue from applicable products could be
reduced. Further, if this occurs, our competitors may take
advantage of our investment in development and trials by
referencing our clinical and preclinical data and launch their
product earlier than might otherwise be the case, and our
competitive position, business, financial condition, results of
operations, and prospects could be materially harmed.
Intellectual property disputes could require us to spend time and
money to address such disputes and could limit our intellectual
property rights.
The
biopharmaceutical industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights, and companies have employed intellectual property
litigation and USPTO post-grant proceedings to gain a competitive
advantage. We may become subject to infringement claims or
litigation arising out of patents and pending applications of our
competitors, or additional interference proceedings declared by the
USPTO to determine the priority and patentability of inventions.
The defense and prosecution of intellectual property suits, USPTO
proceedings, and related legal and administrative proceedings are
costly and time-consuming to pursue, and their outcome is
uncertain. Litigation may be necessary to enforce our issued
patents, to protect our trade secrets and know-how, or to determine
the enforceability, scope, and validity of the proprietary rights
of others. An adverse determination in litigation or USPTO
post-grant and interference proceedings to which we may become a
party could subject us to significant liabilities, require us to
obtain licenses from third parties, or restrict or prevent us from
selling our products in certain markets. Even if a given patent or
intellectual property dispute were settled through licensing or
similar arrangements, our costs associated with such arrangements
may be substantial and could include the payment by us of large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at all. Even
where we have meritorious claims or defenses, the costs of
litigation may prevent us from pursuing these claims or defenses
and/or may require extensive financial and personnel resources to
pursue these claims or defenses. In addition, it is possible there
may be defects of form in our current and future patents that could
result in our inability to defend the intended claims. Intellectual
property disputes arising from the aforementioned factors, or other
factors, may materially harm our business.
We may not be able to enforce our intellectual property rights
throughout the world.
The
laws of some foreign countries do not protect intellectual property
rights to the same extent as the laws of the U.S. Companies have
encountered significant problems in protecting and defending
intellectual property rights in certain foreign jurisdictions. The
legal systems of some countries, particularly developing countries,
do not favor the enforcement of patents and other intellectual
property protection, especially those relating to life sciences.
This could make it difficult for us to stop the infringement of our
patents or the misappropriation of our other intellectual property
rights. For example, many foreign countries have compulsory
licensing laws under which a patent owner must grant licenses to
third parties. In addition, many countries limit the enforceability
of patents against third parties, including government agencies or
government contractors. In these countries, patents may provide
limited or no benefit.
Proceedings to
enforce our patent rights in foreign jurisdictions, whether or not
successful, could result in substantial costs and divert our
efforts and attention from other aspects of our business.
Furthermore, while we intend to protect our intellectual property
rights in our expected significant markets, we cannot ensure that
we will be able to initiate or maintain similar efforts in all
jurisdictions in which we may wish to market Validive or any future
products. Accordingly, our efforts to protect our intellectual
property rights in such countries may be inadequate. In addition,
changes in the law and legal decisions by courts in the U.S. and
foreign countries may affect our ability to obtain and enforce
adequate intellectual property protection for our products and
technology.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In
addition to seeking patent protection, we also rely on trade
secrets, including unpatented know-how, technology and other
proprietary information, to maintain our competitive position. We
seek to protect these trade secrets, in part, by entering into
non-disclosure and confidentiality agreements with parties who have
access to them. Despite these efforts, these parties may breach the
agreements and disclose our proprietary information, including our
trade secrets, and we may not be able to obtain adequate remedies
for such breaches. Enforcing a claim that a party illegally
disclosed or misappropriated a trade secret is difficult, expensive
and time-consuming, and the outcome is unpredictable. In addition,
some courts inside and outside the U.S., including in foreign
jurisdictions, are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained
or independently developed by a competitor, we would have no right
to prevent them from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed
to or independently developed by a competitor, our competitive
position would be harmed.
Changes to the patent law in the U.S. and other jurisdictions could
diminish the value of patents in general, thereby impairing our
ability to protect our product candidates.
As is
the case with other biopharmaceutical companies, our success is
heavily dependent on intellectual property, particularly patents.
Obtaining and enforcing patents in the biopharmaceutical industry
involves both technological and legal complexity. Therefore,
obtaining and enforcing biopharmaceutical patents is costly, time
consuming and inherently uncertain. In addition, the U.S. has
recently enacted and is currently implementing wide ranging patent
reform legislation. The U.S. Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of patent
protection available in certain circumstances or weakening the
rights of patent owners in certain situations. In addition to
increasing uncertainty with regard to our ability to obtain patents
in the future, this combination of events has created uncertainty
with respect to the value of patents once obtained. Depending on
future actions by the U.S. Congress, the federal courts and the
USPTO, as well as other jurisdictions around the world, the laws
and regulations governing patents could change in unpredictable
ways that would weaken our ability to obtain new patents or to
enforce our existing patents and patents that we might obtain in
the future.
Obtaining and maintaining our patent protection depends on
compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements.
The
USPTO and various foreign governmental patent agencies require
compliance with a number of procedural, documentary, fee payment
and other provisions during the patent process. There are
situations in which noncompliance can result in abandonment or
lapse of a patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. In
such an event, competitors might be able to enter the market
earlier than would otherwise have been the case.
If we fail to comply with our obligations under any license,
collaboration or other intellectual property-related agreements, we
may be required to pay damages and could lose intellectual property
rights that may be necessary for developing, commercializing and
protecting our current or future technologies or drug candidates or
we could lose certain rights to grant sublicenses.
Any
license, collaboration or other intellectual property-related
agreements impose, and any future license, collaboration or other
intellectual property-related agreements we enter into are likely
to impose, various development, commercialization, funding,
milestone, royalty, diligence, sublicensing, insurance, patent
prosecution and enforcement or other obligations on us. If we
breach any of these obligations, or use the intellectual property
licensed to us in an unauthorized manner, we may be required to pay
damages and the licensor may have the right to terminate the
license. In spite of our best efforts, any of our future licensors
might conclude that we have materially breached our license
agreements and might therefore terminate the license agreements,
thereby removing our ability to develop and commercialize products
and technologies covered by these license agreements. Any license
agreements we enter into may be complex, and certain provisions in
such agreements may be susceptible to multiple interpretations. The
resolution of any contract interpretation disagreement that may
arise could narrow what we believe to be the scope our rights to
the relevant intellectual property or technology, or increase what
we believe to be our financial or other obligations under the
relevant agreement, either of which could have a material adverse
effect on our business, financial condition, results of operations,
and prospects.
We
may seek to obtain licenses from licensors in the future, however,
we may be unable to obtain any such licenses at a reasonable cost
or on reasonable terms, if at all. In addition, if any of our
future licensors terminate any such license agreements, such
license termination could result in our inability to develop,
manufacture and sell products that are covered by the licensed
technology or could enable a competitor to gain access to the
licensed technology. Any of these events could have a material
adverse effect on our competitive position, business, financial
condition, results of operations, and ability to achieve
profitability.
Furthermore,
we may not have the right to control the preparation, filing,
prosecution, maintenance, enforcement and defense of patents and
patent applications that we license from third parties. Therefore,
we cannot be certain that these patents and patent applications
will be prepared, filed, prosecuted, maintained, enforced and
defended in a manner consistent with the best interests of our
business. If our future licensors fail to prosecute, maintain,
enforce and defend patents we may in-license, or lose rights to
licensed patents or patent applications, our license rights may be
reduced or eliminated. In such circumstances, our right to develop
and commercialize any of our products or drug candidates that is
the subject of such licensed rights could be materially adversely
affected. In certain circumstances, our licensed patent rights are
subject to our reimbursing our licensors for their patent
prosecution and maintenance costs.
Moreover,
our licensors may own or control intellectual property that has not
been licensed to us and, as a result, we may be subject to claims,
regardless of their merit, that we are infringing, misappropriating
or otherwise violating the licensor’s intellectual property
rights and the amount of any damages or future royalty obligations
that would result, if any such claims were successful, would depend
on the technology and intellectual property we use in products that
we successfully develop and commercialize, if any. Therefore, even
if we successfully develop and commercialize products, due to such
obligations, we may be unable to achieve or maintain
profitability.
Third parties may initiate legal proceedings alleging that we are
infringing, misappropriating or otherwise violating their
intellectual property rights, the outcome of which would be
uncertain and could have a material adverse impact on the success
of our business.
Our
commercial success depends, in part, upon our ability or the
ability of any of our future collaborators to develop, manufacture,
market and sell our current or any future drug candidates and to
use our proprietary technologies without infringing,
misappropriating or otherwise violating the proprietary and
intellectual property rights of third parties. The biotechnology
and pharmaceutical industries are characterized by extensive and
complex litigation regarding patents and other intellectual
property rights.
We
or any of our future licensors or strategic partners, may be party
to, or be threatened with, adversarial proceedings or litigation
regarding intellectual property rights with respect to our current
or any potential future drug candidates and technologies, including
derivation, reexamination, inter partes review, post-grant review
or interference proceedings before the USPTO and similar
proceedings in jurisdictions outside of the U.S. such as opposition
proceedings. If we or our licensors or strategic partners are
unsuccessful in any interference proceedings or other priority or
validity disputes (including through any patent oppositions) to
which we or they are subject, we may lose valuable intellectual
property rights through the loss of one or more patents or our
patent claims may be narrowed, invalidated, or held unenforceable.
In some instances, we may be required to indemnify our licensors or
strategic partners for the costs associated with any such
adversarial proceedings or litigation. Third parties may also
assert infringement, misappropriation or other claims against us,
our licensors or our strategic partners based on existing patents
or patents that may be granted in the future, as well as other
intellectual property rights, regardless of their merit. There is a
risk that third parties may choose to engage in litigation or other
adversarial proceedings with us, our licensors or our strategic
partners to enforce or otherwise assert their patent rights or
other intellectual property rights. Even if we believe such claims
are without merit, a court of competent jurisdiction could hold
that these third-party patents and other intellectual property
rights are valid, enforceable and infringed, which could have a
material adverse impact on our ability to utilize our developed
technologies or to commercialize our current or any future drug
candidates deemed to be infringing. In order to successfully
challenge the validity of any such U.S. patent in federal court, we
would need to overcome a presumption of validity by presenting
clear and convincing evidence of invalidity. There is no assurance
that a court of competent jurisdiction, even if presented with
evidence we believe to be clear and convincing, would invalidate
the claims of any such U.S. patent.
Further,
we cannot guarantee that we will be able to successfully settle or
otherwise resolve such adversarial proceedings or litigation. If we
are unable to successfully settle future claims on terms acceptable
to us, we may be required to engage in or to continue costly,
unpredictable and time consuming litigation and may be prevented
from or experience substantial delays in marketing our drug
candidates. If we or any of our licensors or strategic partners are
found to infringe, misappropriate or violate a third-party patent
or other intellectual property rights, we could be required to pay
damages, including treble damages and attorney’s fees, if we
are found to have willfully infringed. In addition, we, or any of
our licensors or strategic partners may choose to seek, or be
required to seek, a license from a third-party, which may not be
available on commercially reasonable terms, if at all. Even if a
license can be obtained on commercially reasonable terms, the
rights may be non-exclusive, which could give our competitors
access to the same technology or intellectual property rights
licensed to us, and we could be required to make substantial
licensing and royalty payments. We also could be forced, including
by court order, to cease utilizing, developing, manufacturing and
commercializing our developed technologies or drug candidates
deemed to be infringing. We may be forced to redesign current or
future technologies or products. Any of the foregoing could have a
material adverse effect on our ability to generate revenue or
achieve profitability and possibly prevent us from generating
revenue sufficient to sustain our operations.
In
addition, we or our licensors or strategic partners may find it
necessary to pursue claims or to initiate lawsuits to protect or
enforce our patent or other intellectual property rights. If we or
our licensors or strategic partners were to initiate legal
proceedings against a third-party to enforce a patent covering one
of our drug candidates or our developed technology, the defendant
could counterclaim that such patent is invalid or unenforceable. In
patent litigation in the U.S., defendant counterclaims alleging
invalidity or unenforceability are commonplace. Grounds for a
validity challenge could be an alleged failure to meet any of
several statutory requirements, for example, claiming
patent-ineligible subject matter, lack of novelty, indefiniteness,
lack of written description, non-enablement, anticipation or
obviousness. Grounds for an unenforceability assertion could be an
allegation that someone connected with prosecution of the patent
withheld relevant information from the USPTO or made a misleading
statement during prosecution. The outcome of such invalidity and
unenforceability claims is unpredictable. With respect to the
validity question, for example, we cannot be certain that there is
no invalidating prior art of which we or our licensors or strategic
partners and the patent examiner were unaware during prosecution.
If a defendant were to prevail on a legal assertion of invalidity
or unenforceability, we could lose at least part, and perhaps all,
of the patent protection for one or more of our drug candidates.
The narrowing or loss of our owned and licensed patent claims could
limit our ability to stop others from using or commercializing
similar or identical technologies and products. All of these events
could have a material adverse effect on our business, financial
condition, results of operations and prospects. Patent and other
intellectual property rights also will not protect our drug
candidates and technologies if competitors or third parties design
around such drug candidates and technologies without legally
infringing, misappropriating or violating our patent or other
intellectual property rights.
The
cost to us in defending or initiating any litigation or other
proceedings relating to our patent or other intellectual property
rights, even if resolved in our favor, could be substantial, and
any litigation or other proceedings would divert our
management’s attention and distract our personnel from their
normal responsibilities. Such litigation or proceedings could
materially increase our operating losses and reduce the resources
available for development activities or any future sales, marketing
or distribution activities. We may not have sufficient financial or
other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to more effectively
sustain the costs of complex patent litigation because they have
substantially greater resources. Uncertainties resulting from the
initiation and continuation of patent litigation or other
proceedings could delay our research and development efforts and
materially limit our ability to continue our operations.
Furthermore, because of the substantial amount of discovery
required in connection with certain such proceedings, there is a
risk that some of our confidential information could be compromised
by disclosure. In addition, there could be public announcements of
the results of hearings, motions or other interim proceedings or
developments and if securities analysts or investors perceive these
results to be negative, such announcements could have a material
adverse effect on the price of our common stock.
Intellectual property rights of third parties could adversely
affect our ability to commercialize our current or future
technologies or drug candidates, and we might be required to
litigate or obtain licenses from third parties to develop or market
our current or future technologies or drug candidates, which may
not be available on commercially reasonable terms, or at
all.
There
are numerous companies that have pending patent applications and
issued patents broadly covering immune-therapies generally or
covering small molecules directed against the same targets as, or
targets similar to, those we are pursuing. Our competitive position
may materially suffer if patents issued to third parties or other
third-party intellectual property rights cover our current or
future technologies, drug candidates or elements thereof, or our
manufacture or uses relevant to our development plans. In such
cases, we may not be in a position to develop or commercialize
current or future technologies or drug candidates unless we
successfully pursue litigation to nullify or invalidate the
third-party intellectual property rights concerned, or enter into a
license agreement with the intellectual property rights holder, if
available on commercially reasonable terms. There may be issued
patents of which we are not aware, held by third parties that, if
found to be valid and enforceable, could be alleged to be infringed
by our current or future technologies or drug candidates. There
also may be pending patent applications of which we are not aware
that may result in issued patents, which could be alleged to be
infringed by our current or future technologies or drug candidates.
Should such an infringement claim be successfully brought, we may
be required to pay substantial damages or be forced to abandon our
current or future technologies or drug candidates or to seek a
license from any patent holders. No assurances can be given that a
license will be available on commercially reasonable terms, if at
all.
Third-party
intellectual property rights holders may also actively bring
infringement, misappropriation or other claims alleging violations
of intellectual property rights against us. We cannot guarantee
that we will be able to successfully settle or otherwise resolve
such claims. If we are unable to successfully settle future claims
on terms acceptable to us, we may be required to engage in or to
continue costly, unpredictable and time-consuming litigation and
may be prevented from, or experience substantial delays in,
marketing our drug candidates. If we fail in any such dispute, in
addition to being forced to pay damages, we may be temporarily or
permanently prohibited from commercializing any of our current or
future technologies or drug candidates that are held to be
infringing, misappropriating or otherwise violating third-party
intellectual property rights. We might, if possible, also be forced
to redesign current or future technologies or drug candidates so
that we no longer infringe, misappropriate or violate the
third-party intellectual property rights. Any of these events, even
if we were ultimately to prevail, could require us to divert
substantial financial and management resources that we would
otherwise be able to devote to our business, which could have a
material adverse effect on our financial condition and results of
operations.
Risks
Related to Our Business Operations and Industry
As a recently established entity, we have a limited operating
history.
As of
November 4, 2019, we have engaged exclusively in
acquiring pharmaceutical product candidates, licensing rights to
product candidates and entering into collaboration agreements with
respect to key services or technologies for our drug product
development, and have not completed any clinical trials, received
any governmental approvals, brought any product to market,
manufactured products in clinical or commercial quantities or sold
any pharmaceutical products. As a company we have limited
experience in negotiating, establishing, and maintaining strategic
relationships, conducting clinical trials, and managing the
regulatory approval process, all of which will be necessary if we
are to be successful. Our lack of experience in these critical
areas makes it difficult for a prospective investor to evaluate our
abilities and increases the risk that we will fail to successfully
execute our strategies.
Furthermore, if our
business grows rapidly, our operational, managerial, legal, and
financial resources will be strained. Our development will require
continued improvement and expansion of our management team and our
operational, managerial, legal, and financial systems and
controls.
In the
normal course of business, we have evaluated and expect to evaluate
potential acquisitions and/or licenses of patents, compounds, and
technologies that our management believes could complement or
expand our business. We have limited history of conducting
acquisitions and negotiating and acquiring licenses. In the event
that we identify an acquisition or license candidate we find
attractive, there is no assurance that we will be successful in
negotiating an agreement to acquire or license, or in financing or
profitably exploiting, such patents, compounds, or technologies.
Furthermore, such an acquisition or license could divert management
time and resources away from other activities that would further
our current business development.
If we lose key management leadership, and/or scientific personnel,
and if we cannot recruit qualified employees, managers, directors,
officers, or other significant personnel, we may experience program
delays and increases in compensation costs, and our business may be
materially disrupted.
Our
future success is highly dependent on the continued service of
principal members of our management, leadership, and scientific
personnel, who are able to terminate their employment with us at
any time and may be able to compete with us. The loss of any of our
key management, leadership, or scientific personnel including, in
particular, Christopher M. Starr, our Executive Chairman of the
Board of Directors (referred to as the “Board”),
Chandler D. Robinson, our President and CEO, and Andrew P. Mazar,
our Executive Vice President of Research and Development and Chief
Scientific Officer, could materially disrupt our business and
materially delay or prevent the successful product development and
commercialization of our product candidates. We have employment
agreements with Dr. Robinson and Dr. Mazar which have no term but
are for at-will employment, meaning the executives have the ability
to terminate their employment at any time. We do not have an
employment agreement with Dr. Starr.
Our
future success will also depend on our continuing ability to
identify, hire, and retain highly skilled personnel for all areas
of the organization. Competition in the biopharmaceutical industry
for scientifically and technically qualified personnel is intense,
and we may be unsuccessful in identifying, hiring, and retaining
qualified personnel. Our continued requirement to identify, hire,
and retain highly competent personnel may cause our compensation
costs to increase materially.
We will incur increased costs as a result of operating as a
stock trading public company, and our management will
be required to devote substantial time to new compliance
initiatives and corporate governance practices.
As a
stock trading public company, and particularly after
we are no longer an emerging growth company, we will incur
significant legal, accounting and other expenses that we did not
incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank
Wall Street Reform and Consumer Protection Act, the listing
requirements of the Nasdaq Capital Market and other applicable
securities rules and regulations impose various requirements on
stock trading public companies, including
establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and
other personnel will need to devote a substantial amount of time to
these compliance initiatives. Moreover, these rules and regulations
will increase our legal and financial compliance costs and will
make some activities more time-consuming and costly. For example,
we expect that these rules and regulations may make it more
difficult and more expensive for us to obtain director and officer
liability insurance, which in turn could make it more difficult for
us to attract and retain qualified members of our board of
directors. However, these rules and regulations are often subject
to varying interpretations, in many cases due to their lack of
specificity, and, as a result, their application in practice may
evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance
practices.
Despite ongoing compliance training and periodic education, our
employees and consultants may engage in misconduct or other
improper activities, including noncompliance with regulatory
standards and requirements, which could result in delays or
terminations of our development programs and adversely affect our
business.
Although we
regularly train our employees on compliance and we are aware of no
misconduct or improper activities to date, we are exposed to the
risk of employee or consultant fraud or other misconduct.
Misconduct by our employees or consultants could include
intentional failures to: comply with FDA regulations; provide
accurate information to the FDA; comply with manufacturing
standards; comply with federal and state healthcare fraud and abuse
laws and regulations; report financial information or data
accurately or disclose unauthorized activities to us. In
particular, sales, marketing and business arrangements in the
healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, kickbacks, self-dealing and other
abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other
business arrangements. Employee and consultant misconduct could
also involve the improper use of information obtained in the course
of clinical trials, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to
identify and deter such misconduct, and the precautions we take to
detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and we
are not successful in defending ourselves or asserting our rights,
those actions could have a significant impact on our business,
including the imposition of significant fines or other sanctions.
Such actions could adversely affect our business including delaying
or terminating one or more of our development
programs.
We are an emerging growth company and we cannot be certain if the
reduced disclosure requirements applicable to emerging growth
companies will make our common stock less attractive to
investors.
We are
an emerging growth company. Under the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), emerging growth
companies can delay adopting new or revised accounting standards
until such time as those standards apply to private companies.
We have irrevocably elected to opt out
of this provision and, as a result, we will comply with new or
revised accounting standards when they are required to be adopted
by public companies that are not emerging growth
companies.
For as
long as we continue to be an emerging growth company, we also
intend to take advantage of certain other exemptions from various
reporting requirements that are applicable to other public
companies including, but not limited to, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, exemptions from the requirements of
holding a nonbinding advisory stockholder vote on executive
compensation and any golden parachute payments not previously
approved, exemption from the requirement of auditor attestation in
the assessment of our internal control over financial reporting and
exemption from any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements
(auditor discussion and analysis). If we do take advantage of these
exemptions, the information that we provide stockholders will be
different than what is available with respect to other public
companies. We cannot predict if investors will find our common
stock less attractive because we will rely on these exemptions. If
investors find our common stock less attractive as a result of our
status as an emerging growth company, if and when our stock becomes
publicly traded, there may be less liquidity for our common stock
and our stock price may be more volatile.
We will
remain an emerging growth company until the earliest of (1) the
last day of the year (a) following the fifth anniversary of the
completion of a public offering, (b) in which we have total annual
gross revenue of at least $1.07 billion or (c) in which we are
deemed to be a large accelerated filer, which means the market
value of our common stock that is held by non-affiliates exceeds
$700 million as of the prior June 30th, and (2) the date on which
we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period.
Competition and technological change may make our product
candidates less competitive or obsolete.
The
biopharmaceutical industry is subject to rapid technological
change. We have many potential competitors, including major drug
and chemical companies, specialized biopharmaceutical firms,
universities and other research institutions. These companies,
firms, and other institutions may develop products that are more
effective than our product candidates or that would make our
product candidates less competitive or obsolete. Many of these
companies, firms, and other institutions have greater financial
resources than us and may be better able to withstand and respond
to adverse market conditions within the biopharmaceutical industry,
including without limitation the lengthy regulatory approval
process for product candidates.
We face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer if
we fail to compete effectively.
The
biotechnology and pharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products. While we believe we have
significant competitive advantages with our expertise in small
molecules and biologics, and rare disease clinical development,
along with a strong intellectual property portfolio, we currently
face and will continue to face competition for our drug development
programs from companies that target SOM, are developing doxorubicin
analogs/replacement, and are targeting uPAR. The competition is
likely to come from multiple sources, including larger
pharmaceutical companies, biotechnology companies and academia.
Accordingly, our competitors may have more resources and be more
successful than us in obtaining approval for treatments and
achieving widespread market acceptance. For any products that we
may ultimately commercialize, not only will we compete with any
existing therapies and those therapies currently in development, we
will have to compete with new therapies that may become available
in the future.
We may engage in strategic transactions that could impact our
liquidity, increase our expenses and present significant
distractions to our management.
From
time to time, we may consider strategic transactions, such as
acquisitions of companies, asset purchases, and out-licensing or
in-licensing of products, product candidates or technologies.
Additional potential transactions that we may consider include a
variety of different business arrangements, including spin-offs,
strategic partnerships, joint ventures, restructurings,
divestitures, business combinations and investments. Any such
transaction may require us to incur non-recurring or other charges,
may increase our near- and long-term expenditures and may pose
significant integration challenges or disrupt our management or
business, which could adversely affect our operations and financial
results. For example, these transactions may entail numerous
operational and financial risks, including:
●
exposure to unknown
liabilities;
●
disruption of our
business and diversion of our management's time and attention in
order to develop acquired products, product candidates or
technologies;
●
incurrence of
substantial debt or dilutive issuances of equity securities to pay
for acquisitions;
●
higher-than-expected
acquisition and integration costs;
●
write-downs of
assets, goodwill or impairment charges;
●
increased
amortization expenses;
●
difficulty and cost
in combining the operations and personnel of any acquired
businesses with our operations and personnel;
●
impairment of
relationships with key suppliers or customers of any acquired
businesses due to changes in management and ownership;
and
●
inability to retain
key employees of any acquired businesses.
Accordingly,
although there can be no assurance that we will undertake or
successfully complete any transactions of the nature described
above, any transactions that we do complete may be subject to the
foregoing or other risks, and could have a material adverse effect
on our business, results of operations, financial condition and
prospects.
If product liability lawsuits are brought against us, we may incur
substantial costs to defend them and address any damages awarded,
and demand for our products could be reduced as a result of such
lawsuits.
The
testing and marketing of medical products is subject to an inherent
risk of product liability claims, including a possibility in some
states for product liability claims being made based on generic
copies of our drugs. Since we currently are not sponsoring any
clinical trials, we do not have product liability insurance
coverage, but plan to obtain appropriate coverage when we enroll
patients in a Validive or other clinical trial, assuming the
coverage is available at a commercially reasonable cost, if
available at all. Regardless of their merit or eventual outcome,
product liability claims may result in:
●
withdrawal of
clinical trial volunteers;
●
decreased demand
for our products when approved;
●
injury to our
reputation and significant, adverse media attention;
and
●
potentially
significant litigation costs, including without limitation, any
damages awarded to the plaintiffs if we lose or settle
claims.
Our business and operations are vulnerable to computer system
failures, cyber-attacks or deficiencies in our cyber-security,
which could increase our expenses, divert the attention of our
management and key personnel away from our business operations and
adversely affect our results of operations.
Despite
the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are to damage
from: computer viruses; malware; natural disasters; terrorism; war;
telecommunication and electrical failures; cyber-attacks or
cyber-intrusions over the Internet; attachments to emails; persons
inside our organization; or persons with access to systems inside
our organization. The risk of a security breach or disruption,
particularly through cyber-attacks or cyber intrusion, including by
computer hackers, foreign governments, and cyber terrorists, has
generally increased as the number, intensity and sophistication of
attempted attacks and intrusions from around the world have
increased. If such an event were to occur and cause interruptions
in our operations, it could result in a material disruption of our
product development programs. For example, the loss of clinical
trial data from completed or ongoing or planned clinical trials
could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data.
To the extent that any disruption or security breach was to result
in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur material legal claims and liability,
and damage to our reputation, and the further development of our
product candidates could be delayed. We could be forced to expend
significant resources in response to a cyber security breach,
including repairing system damage, increasing cyber security
protection costs by deploying additional personnel and protection
technologies, paying regulatory fines and resolving legal claims
and regulatory actions, all of which would increase our expenses,
divert the attention of our management and key personnel away from
our business operations and adversely affect our results of
operations.
Failure to comply with health and data protection laws and
regulations could lead to government enforcement actions (which
could include civil or criminal penalties), private litigation or
adverse publicity and could negatively affect our operating results
and business.
We and
our current and any of our future collaborators may be subject to
federal, state and foreign data protection laws and regulations
(i.e., laws and regulations that address privacy and data
security). In the U.S., numerous federal and state laws and
regulations, including federal health information privacy laws
(e.g., the Health Insurance Portability and Accountability Act
(“HIPAA”), as amended by the Health Information
Technology for Economic and Clinical Health Act
(“HITECH”)), state data breach notification laws, state
health information privacy laws and federal and state consumer
protection laws (e.g., Section 5 of the Federal Trade Commission
Act), that govern the collection, use, disclosure and protection of
health-related and other personal information could apply to our
operations or the operations of our collaborators. In addition, we
may obtain health information from third parties (including
research institutions from which we obtain clinical trial data)
that are subject to privacy and security requirements under HIPAA,
as amended by HITECH, or other privacy and data security laws.
Depending on the facts and circumstances, we could be subject to
criminal penalties if we knowingly obtain, use, or disclose
individually identifiable health information maintained by a
HIPAA-covered entity in a manner that is not authorized or
permitted by HIPAA.
International data
protection laws, including Regulation 2016/679, known as the
General Data Protection Regulation (“GDPR”) may also
apply to health-related and other personal information obtained
outside of the U.S. The GDPR went into effect on May 25, 2018. The
GDPR introduced new data protection requirements in the EU, as well
as potential fines for non-compliant companies of up to the greater
of €20 million or 4% of annual global revenue. The regulation
imposes numerous new requirements for the collection, use, storage
and disclosure of personal information, including more stringent
requirements relating to consent and the information that must be
shared with data subjects about how their personal information is
used, the obligation to notify regulators and affected individuals
of personal data breaches, extensive new internal privacy
governance obligations and obligations to honor expanded rights of
individuals in relation to their personal information (e.g., the
right to access, correct and delete their data). In addition, the
GDPR includes restrictions on cross-border data transfers. The GDPR
increased our responsibility and liability in relation to personal
data that we process where such processing is subject to the GDPR,
and we may be required to put in place additional mechanisms to
ensure compliance with the GDPR, including as implemented by
individual countries. Further, the United Kingdom’s vote in
favor of exiting the EU, often referred to as Brexit, has created
uncertainty with regard to data protection regulation in the United
Kingdom. In particular, it is unclear how data transfers to and
from the United Kingdom will be regulated.
In
addition, California recently enacted the California Consumer
Privacy Act (“CCPA”), which creates new individual
privacy rights for California consumers (as defined in the law) and
places increased privacy and security obligations on entities
handling personal data of consumers or households. The CCPA will
require covered companies to provide new disclosure to consumers
about such companies’ data collection, use and sharing
practices, provide such consumers new ways to opt-out of certain
sales or transfers of personal information, and provide consumers
with additional causes of action. The CCPA goes into effect on
January 1, 2020, and the California Attorney General may bring
enforcement actions for violations beginning July 1, 2020. The CCPA
was amended on September 23, 2018, and it remains unclear what, if
any, further modifications will be made to this legislation or how
it will be interpreted. As currently written, the CCPA may impact
our business activities and exemplifies the vulnerability of our
business to the evolving regulatory environment related to personal
data and protected health information.
Compliance with
U.S. and international data protection laws and regulations could
require us to take on more onerous obligations in our contracts,
restrict our ability to collect, use and disclose data, or in some
cases, impact our ability to operate in certain jurisdictions.
Failure to comply with U.S. and international data protection laws
and regulations could result in government enforcement actions
(which could include civil or criminal penalties), private
litigation or adverse publicity and could negatively affect our
operating results and business.
If we, our CROs or our IT vendors experience security or data
privacy breaches or other unauthorized or improper access to, use
of, or destruction of personal data, we may face costs, significant
liabilities, harm to our brand and business
disruption.
In
connection with our drug research and development efforts, we or
our CROs may collect and use a variety of personal data, such as
names, mailing addresses, email addresses, phone numbers and
clinical trial information. Although we have extensive measures in
place to prevent the sharing and loss of patient data in our
clinical trial processes associated with our developed technologies
and drug candidates, any failure to prevent or mitigate security
breaches or improper access to, use of, or disclosure of our
clinical data or patients’ personal data could result in
significant liability under state (e.g., state breach notification
laws), federal (e.g., HIPAA, as amended by HITECH), and
international laws (e.g., the GDPR). Any failure to prevent or
mitigate security breaches or improper access to, use of, or
disclosure of our clinical data or patients’ personal data
may cause a material adverse impact to our reputation, affect our
ability to conduct new studies and potentially disrupt our
business. We may also rely on third-party IT vendors to host or
otherwise process some of our data and that of users, and any
failure by such IT vendor to prevent or mitigate security breaches
or improper access to or disclosure of such information could have
similarly adverse consequences for us. If we are unable to prevent
or mitigate the impact of such security or data privacy breaches,
we could be exposed to litigation and governmental investigations,
which could lead to a potential disruption to our
business.
If we do not comply with laws regulating the protection of the
environment and health and human safety, our business could be
adversely affected.
Our
research and development and drug candidates and future commercial
manufacturing may involve the use of hazardous materials and
various chemicals. We currently do not maintain a research
laboratory, but we engage third-party research organizations and
manufacturers to conduct our preclinical studies, clinical trials
and manufacturing. These third-party laboratories and manufacturers
are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of
these hazardous materials. We must rely on the third parties’
procedures for storing, handling and disposing of these materials
in their facilities to comply with the relevant guidelines of the
states in which they operate and the Occupational Safety and Health
Administration of the U.S. Department of Labor. Although we believe
that their safety procedures for handling and disposing of these
materials comply with the standards mandated by applicable
regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. If an accident occurs, this
could result in significant delays in our development. We are also
subject to numerous environmental, health and workplace safety laws
and regulations. Although we maintain workers’ compensation
insurance to cover us for costs and expenses we may incur due to
injuries to our employees, this insurance may not provide adequate
coverage against potential liabilities. Additional federal, state
and local laws and regulations affecting our operations may be
adopted in the future. We may incur substantial costs to comply
with, and substantial fines or penalties if we violate, any of
these laws or regulations.
We have limited the liability of and indemnified our directors and
officers.
Although our
directors and officers are accountable to us and must exercise good
faith, good business judgement, and integrity in handling our
affairs, our Second Amended and Restated Certificate of
Incorporation (the “Certificate of Incorporation”),
provides that our directors will be indemnified to the fullest
extent permitted under Delaware law. As a result, our stockholders
may have fewer rights against our directors than they would have
absent such provisions in our Certificate of Incorporation, and a
stockholder’s ability to seek and recover damages for a
breach of fiduciary duties may be reduced or restricted. Delaware
law allows indemnification of members of our Board (each a
“Member”), if such Board Member (a) has acted in good
faith, in a manner the Board Member reasonably believes to be in or
not opposed to our best interests, and (b) with respect to any
criminal action or proceeding, if the Board Member had no
reasonable cause to believe the conduct was unlawful.
Pursuant to the
Certificate of Incorporation, each director and (to the extent
approved by our Board) each of our officers who is made a party to
a legal proceeding because he or she is or was a Board Member or
officer, is indemnified by us from and against any and all
liability, except that we may not indemnify a Board Member or
officer: (a) for any liability incurred in a proceeding in which
such person is adjudged liable to Monopar or is subjected to
injunctive relief in favor of Monopar; (b) for acts or omissions
that involve intentional misconduct or a knowing violation of law,
fraud or gross negligence; (c) for unlawful distributions; (d) for
any transaction for which such Board Member or officer received a
personal benefit or as otherwise prohibited by or as may be
disallowed under Delaware law; or (e) with respect to any dispute
or proceeding between us and such Board Member or officer unless
such indemnification has been approved by a disinterested majority
of Board Members or by a majority in interest of disinterested
stockholders. We are required to pay or reimburse attorney’s
fees and expenses of a Board Member seeking indemnification as they
are incurred, provided the director executes an agreement to repay
the amount to be paid or reimbursed if there is a final
determination by a court of competent jurisdiction that such person
is not entitled to indemnification.
Future legislation or executive or private sector actions may
increase the difficulty and cost for us to commercialize our
products and affect the prices obtained for such
products.
In the
U.S., there have been and continue to be a number of legislative
initiatives to contain healthcare costs. For example, in March
2010, the Patient Protection and Affordable Care Act (the
“PPACA”), was enacted, which substantially changed the
way healthcare is financed by both governmental and private
insurers, and significantly impacted the U.S. pharmaceutical
industry.
Some of
the provisions of the ACA have yet to be fully implemented, and
there have been legal and political challenges to certain aspects
of the ACA. Since January 2017, President Trump has signed two
executive orders and other directives designed to delay,
circumvent, or loosen certain requirements mandated by the ACA.
Concurrently, Congress has considered legislation that would repeal
or repeal and replace all or part of the ACA. While Congress has
not passed comprehensive repeal legislation, two bills affecting
the implementation of certain taxes under the ACA have been signed
into law. The Tax Cuts and Jobs Act of 2017 (the “Tax
Act”), includes a provision that repealed, effective January
1, 2019, the tax-based shared responsibility payment imposed by the
ACA on certain individuals who fail to maintain qualifying
healthcare coverage for all or part of a year, that is commonly
referred to as the “individual mandate.” Additionally,
on January 22, 2018, President Trump signed a continuing resolution
on appropriations for fiscal year 2018 that delayed the
implementation of certain ACA-mandated fees, including the
so-called “Cadillac” tax on certain high cost
employer-sponsored insurance plans, the annual fee imposed on
certain health insurance providers based on market share, and the
medical device excise tax on non-exempt medical devices. Further,
the Bipartisan Budget Act of 2018 (“BBA”), among other
things, amended the ACA, effective January 1, 2019, to close the
coverage gap in most Medicare drug plans, commonly referred to as
the “donut hole.” In July 2018, Centers for Medicare
& Medicaid Services (“CMS”) published a final rule
permitting further collections and payments to and from certain
ACA-qualified healthcare plans and healthcare insurance issuers
under the ACA risk adjustment program in response to the outcome of
federal district court litigation regarding the method CMS uses to
determine this risk adjustment. On December 14, 2018, a U.S.
District Court Judge in the Northern District of Texas ruled that
the individual mandate is an inseverable feature of the ACA, and
therefore, because it was repealed as part of the Tax Act, the
remaining provisions of the ACA are invalid as well. While the
Texas U.S. District Court Judge, as well as the Trump
Administration and CMS have stated that the ruling will have no
immediate effect, it is unclear how this decision, subsequent
appeals, and other efforts to repeal and replace the ACA will
impact the ACA and our business.
The
increasing cost of healthcare as a percentage of GDP and the
massive and increasing deferred liabilities behind most
governmental healthcare programs (such as Medicare and Medicaid and
state and local healthcare programs especially for retirement
benefits) continue to be an economic challenge which threatens the
overall economic health of the U.S. High cost healthcare products
and therapies that are early in their life cycle are attractive
targets for parties that believe that the cost of healthcare must
be better controlled and significantly reduced. Pharmaceutical
prices and healthcare reform have been debated and acted upon by
legislators for many years. Future legislation or executive or
private sector actions related to healthcare reform could
materially and adversely affect our business by reducing our
ability to generate revenue at prices sufficient to reward for the
risks and costs of pharmaceutical development, to raise capital,
and to market our products.
There
is no assurance that federal or state healthcare reform will not
adversely affect our future business and financial results, and we
cannot predict how future federal or state legislative, judicial or
administrative changes relating to healthcare reform and
third-party payers will affect the pharmaceutical industry in
general and our business in particular.
Even if we are able to commercialize any drug candidate, such drug
candidate may become subject to unfavorable pricing regulations or
third-party coverage and reimbursement policies, which would harm
our business.
Our
ability to commercialize any products successfully will depend, in
part, on the extent to which coverage and adequate reimbursement
for these products and related treatments will be available from
third-party payors, such as government authorities, private
healthcare insurers and health maintenance organizations. Patients
who are prescribed medications for the treatment of their
conditions generally rely on third-party payors to reimburse all or
part of the costs associated with their prescription drugs.
Coverage and adequate reimbursement from government healthcare
programs, such as Medicare and Medicaid, and private healthcare
insurers are critical to new product acceptance. Patients are
unlikely to use our future products, if any, unless coverage is
provided and reimbursement is adequate to cover a significant
portion of the cost.
Cost-containment is
a priority in the U.S. healthcare industry and elsewhere. As a
result, government authorities and other third-party payors have
attempted to control costs by limiting coverage and the amount of
reimbursement for particular medications. Increasingly, third-party
payors are requiring that drug companies provide them with
predetermined discounts from list prices and are challenging the
prices charged for medical products. Third-party payors also may
request additional clinical evidence beyond the data required to
obtain marketing approval, requiring a company to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of its products. Commercial
third-party payors often rely upon Medicare coverage policy and
payment limitations in setting their reimbursement rates, but also
have their own methods and approval process apart from Medicare
determinations. Therefore, coverage and reimbursement for
pharmaceutical products in the U.S. can differ significantly from
payor to payor. We cannot be sure that coverage and adequate
reimbursement will be available for any product that we
commercialize and, if reimbursement is available, that the level of
reimbursement will be adequate. Coverage and reimbursement may
impact the demand for, or the price of, any drug candidate for
which we obtain marketing approval. If coverage and reimbursement
are not available or are available only at limited levels, we may
not be able to successfully commercialize any drug candidate for
which we obtain marketing approval.
Additionally, the
regulations that govern regulatory approvals, pricing and
reimbursement for new drugs and therapeutic biologics vary widely
from country to country. Some countries require approval of the
sale price of a drug or therapeutic biologic before it can be
marketed. In many countries, the pricing review period begins after
marketing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. As a
result, we might obtain regulatory approval for a product in a
particular country, but then be subject to price regulations that
delay our commercial launch of the product, possibly for lengthy
time periods, and negatively impact the revenues we are able to
generate from the sale of the product in that country. Adverse
pricing limitations may hinder our ability to recoup our investment
in one or more drug candidates, even if our drug candidates obtain
regulatory approval.
Politically divided governmental actions and related political
actions outside of government can impact the FDA’s role in
the timely and effective review of new pharmaceutical products in
the U.S. and our business may be adversely impacted.
A
relevant example of dysfunctional government was the 35-day
government shutdown that ended February 15, 2019 which limited the
FDA to activities necessary to address imminent threats to human
life and to activities funded by carry-over user fees. Future
government shutdowns or other activities which limit the financial
resources available to the FDA (and in particular to the Center for
Drug Evaluation and Research) will delay the processing of new
product drug development submissions, reviews, and approvals and
other required regulatory actions. Such delays will adversely
impact our business and financial condition.
Effective collaboration with the FDA’s Center for Drug
Evaluation and Research (“CDER”) for the approval of
drug candidates is a highly demanding process which can result in
increased time and expense to gain approvals.
Our
lead drug development program, Validive, will be reviewed by CDER.
Efficient and professional collaboration with the FDA’s CDER
is essential for the timely clinical testing, test evaluations,
analysis and approval of our drug candidates. CDER has an
outstanding record of drug approvals and substantial funds to
operate a highly professional organization, but is also very
demanding as to the quality of clinical research and applications
for marketing approvals for drug candidates.
Our
Company has in-house expertise and experience in the management of
drug approvals. Qualified consultants and drug research
organizations are also available to aid in our drug approval
process; however, there is a meaningful risk that discussions and
interactions inherent in the drug approval process and future
developments or new improvements will result in delays, added
expenses and new scientific/medical requirements which will cause
adverse financial results and will likely impact the price of the
Company’s stock.
Future tax reform measures may negatively impact our financial
position.
Tax
reform measures are unpredictable and can change as the U.S.
congress and executive leadership changes. For example, on December
22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law
that significantly revised the Internal Revenue Code of 1986, as
amended (the “Code”). It is difficult to predict what
future tax reform measures, if any, could be implemented and the
extent to which they will impact our financial condition and our
business.
Foreign currency exchange rates may adversely affect our
consolidated financial statements.
Sales
and purchases in currencies other than the U.S. Dollar expose us to
fluctuations in foreign currencies relative to the U.S. Dollar and
may adversely affect our consolidated financial statements.
Increased strength of the U.S. Dollar increases the effective price
of our future drug products sold in U.S. Dollars into other
countries, which may require us to lower our prices or adversely
affect sales to the extent we do not increase local currency
prices. Decreased strength of the U.S. Dollar could adversely
affect the cost of materials, products and services we purchase
overseas. Sales and expenses of our non-U.S. businesses are also
translated into U.S. Dollars for reporting purposes and the
strengthening or weakening of the U.S. Dollar could result in
unfavorable foreign currency translation and transaction effects.
In addition, certain of our businesses may in the future invoice
customers in a currency other than the business’ functional
currency, and movements in the invoiced currency relative to the
functional currency could also result in unfavorable foreign
currency translation and transaction effects. We also face exchange
rate risk from our investments in subsidiaries owned and operated
in foreign countries.
Our anticipated operating expenses and capital expenditures over
the next year are based upon our management’s estimates of
possible future events. Actual amounts and the cost of new
conditions could differ materially from those estimated by our
management.
Development of
pharmaceuticals and cancer drugs is extremely risky and
unpredictable. We have estimated operating expenses and capital
expenditures over the next year based on certain assumptions. Any
change in the assumptions could and will cause the actual results
to vary substantially from the anticipated expenses and
expenditures and could result in material differences in actual
versus forecasted expenses or expenditures. Furthermore, all of the
factors are subject to the effect of unforeseeable future events.
The estimates of capital expenditures and operating expenses
represent forward-looking statements within the meaning of the
federal securities laws. Prospective investors are cautioned that
any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual events or
results may differ materially from those discussed in the
forward-looking statements as a result of various factors,
including the risk factors set forth under this “Risk
Factors” section in this prospectus. In view of the
foregoing, investors should not rely on these estimates in making a
decision to invest in us.
The financial and operational projections that we may make from
time to time are subject to inherent risks.
The
projections that we provide herein or our management may provide
from time to time (including, but not limited to, the cost and
timing of our Phase 3 clinical trials, clinical and regulatory
timelines, production and supply matters, commercial launch dates,
and other financial or operational matters) reflect numerous
assumptions made by our management, including assumptions with
respect to our specific as well as general business, regulatory,
economic, market and financial conditions and other matters, all of
which are difficult to predict and many of which are beyond our
control. Accordingly, there is a risk that the assumptions made in
preparing the projections, or the projections themselves, will
prove inaccurate. There may be differences between actual and
projected results, and actual results may be materially different
from those contained in the projections. The inclusion of the
projections in this prospectus should not be regarded as an
indication that we, our management, the underwriters or their
respective representatives considered or consider the projections
to be a guaranteed prediction of future events, and the projections
should not be relied upon as such. See “Cautionary Statement
Concerning Forward-Looking Statements.”
Our present and potential future international operations may
expose us to business, political, operational, and financial risks
associated with doing business outside of the United
States.
Our
business is subject to risks associated with conducting business
internationally. Some of our suppliers and clinical research
organizations and clinical trial sites are located outside of the
U.S. Furthermore, if we or any future collaborator succeeds in
developing any products, we anticipate marketing them in the EU and
other jurisdictions in addition to the U.S. If approved, we or our
collaborator may hire sales representatives and conduct physician
and patient association outreach activities outside of the U.S.
Doing business internationally involves a number of risks,
including but not limited to:
●
multiple,
conflicting and changing laws and regulations such as privacy
regulations, tax laws, export and import restrictions, employment
laws, regulatory requirements, and other governmental approvals,
permits and licenses;
●
failure
by us to obtain and maintain regulatory approvals for the use of
our products in various countries;
●
rejection
or qualification of foreign clinical trial data by the competent
authorities of other countries;
●
additional
potentially relevant third-party patent and other intellectual
property rights that may be necessary to develop and commercialize
our products and drug candidates;
●
complexities
and difficulties in obtaining, maintaining, enforcing and defending
our patent and other intellectual property rights;
●
difficulties
in staffing and managing foreign operations;
●
complexities
associated with managing multiple payor reimbursement regimes,
government payors or patient self-pay systems;
●
limits
in our ability to penetrate international markets;
●
financial
risks, such as longer payment cycles, difficulty collecting
accounts receivable, the impact of local and regional financial
crises on demand and payment for our products and exposure to
foreign currency exchange rate fluctuations;
●
natural
disasters, political and economic instability, including wars,
terrorism and political unrest, outbreak of disease, boycotts,
curtailment of trade and other business restrictions,
implementation of tariffs;
●
certain
expenses including, among others, expenses for travel, translation
and insurance; and
●
regulatory
and compliance risks that relate to anti-corruption compliance and
record-keeping that may fall within the purview of the U.S. Foreign
Corrupt Practices Act, its accounting provisions or its
anti-bribery provisions or provisions of anti-corruption or
anti-bribery laws in other countries.
Any of these factors could harm our ongoing international clinical
operations and supply chain, as well as any future international
expansion and operations and, consequently, our business, financial
condition, prospects and results of operations.
Our future growth may depend, in part, on our ability to operate in
foreign markets, where we would be subject to additional regulatory
burdens and other risks and uncertainties.
Our
future growth may depend, in part, on our ability to develop and
commercialize drug candidates in foreign markets for which we may
rely on partnering with third parties. We will not be permitted to
market or promote any drug candidate before we receive regulatory
approval from the applicable regulatory authority in a foreign
market, and we may never receive such regulatory approval for any
drug candidate. To obtain separate regulatory approval in foreign
countries, we generally must comply with numerous and varying
regulatory requirements of such countries regarding safety and
efficacy and governing, among other things, clinical trials and
commercial sales, pricing and distribution of a drug candidate, and
we cannot predict success in these jurisdictions. If we obtain
approval of any of our current or potential future drug candidates
and ultimately commercialize any such drug candidate in foreign
markets, we would be subject to risks and uncertainties, including
the burden of complying with complex and changing foreign
regulatory, tax, accounting and legal requirements and the reduced
protection of intellectual property rights in some foreign
countries.
We are subject to U.S. and foreign anti-corruption and anti-money
laundering laws with respect to our operations and non-compliance
with such laws can subject us to criminal or civil liability and
harm our business.
We
are subject to the U.S. Foreign Corrupt Practices Act of 1977, as
amended (“the FCPA”), the U.S. domestic bribery statute
contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA
PATRIOT Act, and possibly other state and national anti-bribery and
anti-money laundering laws in countries in which we conduct
activities. Anti-corruption laws are interpreted broadly and
prohibit companies and their employees, agents, third-party
intermediaries, joint venture partners and collaborators from
authorizing, promising, offering or providing, directly or
indirectly, improper payments or benefits to recipients in the
public or private sector. We interact with officials and employees
of government agencies and government-affiliated hospitals,
universities and other organizations. In addition, we may engage
third-party intermediaries to promote our clinical research
activities abroad or to obtain necessary permits, licenses and
other regulatory approvals. We can be held liable for the corrupt
or other illegal activities of these third-party intermediaries,
our employees, representatives, contractors, partners and agents,
even if we do not explicitly authorize or have actual knowledge of
such activities.
We
have a Code of Business Conduct and Ethics which mandates
compliance with the FCPA and other anti-corruption laws applicable
to our business throughout the world. However, we cannot assure you
that our employees and third-party intermediaries will comply with
this code or such anti-corruption laws. Noncompliance with
anti-corruption and anti-money laundering laws could subject us to
whistleblower complaints, investigations, sanctions, settlements,
prosecution, other enforcement actions, disgorgement of profits,
significant fines, damages, other civil and criminal penalties or
injunctions, suspension or debarment from contracting with certain
persons, the loss of export privileges, reputational harm, adverse
media coverage and other collateral consequences. If any subpoenas,
investigations or other enforcement actions are launched, or
governmental or other sanctions are imposed, or if we do not
prevail in any possible civil or criminal litigation, our business,
results of operations and financial condition could be materially
harmed. In addition, responding to any action will likely result in
a materially significant diversion of management’s attention
and resources and significant defense and compliance costs and
other professional fees. In certain cases, enforcement authorities
may even cause us to appoint an independent compliance monitor
which can result in added costs and administrative
burdens.
Risks Associated to our Common Stock and this Offering
Existing and new investors will experience dilution as a result of
future sales or issuances of our common stock and future option
exercises under our stock option plan.
Our
Board Members, employees, and certain of our consultants have been
and will be issued equity and/or granted options that vest with the
passage of time. Up to a total of 1,600,000 shares of our common
stock may be issued as stock options or restricted stock under the
Amended and Restated Monopar Therapeutics Inc. 2016 Stock Incentive
Plan, and stock options for the purchase of up to 1,105,896 shares
of our common stock have already been granted (726,444
stock options are exercisable) and are outstanding as of
November 4, 2019. See “Stock Option Plan”.
The issuance of such equity and/or the exercise of such options
will dilute both our existing and our new investors. As of
November 4, 2019, no stock options have been
exercised.
Our
existing and our new investors will likely also experience
substantial dilution resulting from the issuance by us of equity
securities in connection with certain transactions, including
without limitation, future offering of shares, intellectual
property licensing, acquisition, or commercialization
arrangements.
Holders of the shares of our common stock will have no control of
our operations or of decisions on major transactions.
Our
business and affairs are managed by or under the direction of our
Board. Our Stockholders are entitled to vote only on actions that
require a Stockholder vote under federal or state law. Stockholder
approval requires the consent and approval of holders of a majority
or more of our outstanding stock. Shares of stock do not have
cumulative voting rights and therefore, holders of a majority of
the shares of our outstanding stock will be able to elect all Board
Members. TacticGem owns 7,166,667 shares of common stock (77.1%).
The limited liability company agreement of TacticGem provides that
the manager will vote its shares of Monopar to elect to the Board
those persons nominated by Tactic Pharma plus one person nominated
by Gem Pharmaceuticals, LLC (“Gem”). Additionally,
other than in the elections of directors the limited liability
company agreement requires TacticGem to pass through votes to its
members in proportion to their membership percentages in TacticGem.
As a result, Tactic Pharma, our initial investor, holds an
approximately 46% beneficial interest in us and together with
Gem’s beneficial ownership of approximately 33%, the two
entities control a majority of our stock and will be able to elect
all Board Members and control our affairs. Some of our Board
Members and executive officers own and control Tactic Pharma.
Although no single person has a controlling interest in Tactic
Pharma, acting together, they are able to control Tactic Pharma and
a large voting block of our common stock and elect over a majority
of our Board. See “Principal
Stockholders”.
Our ability to list on Nasdaq will require raising significant
capital; failure to qualify to trade on Nasdaq will make it more
difficult to raise capital.
Our securities have been approved to be listed
on The Nasdaq Capital Market, a national securities exchange, upon
consummation of this offering. We will need to raise
significant funds in the next 12-18 months to continue
our clinical development plans and we believe that if our stock is
trading on Nasdaq’s Capital Market it will enable better
access to capital. Nasdaq has listing requirements for inclusion of
securities for trading on the Nasdaq Capital Market, including
stockholders equity of $4 million (market value standard) or $5
million (equity standard), market value of publicly held shares of
$15 million, an operating history of 2 years under the equity
standard or a market value of listed securities of $50 million
under the market value standard, 1 million publicly held shares,
300 shareholders, three market makers and a $4 bid price or a
closing price of $3 (equity standard) or $2 (market value
standard). If we are unable to list on Nasdaq, it could make it
harder for us to raise capital in both the immediate time frame and
in the long-term. If we are unable to raise capital when needed in
the future, we may have to cease or reduce operations. There can be
no assurance that we will be successful in including our Common
Stock for trading on Nasdaq or that a market will develop for our
Common Stock.
Our failure to meet the continued listing requirements of The
Nasdaq Capital Market could result in a de-listing of our Common
Stock.
If
after qualifying for initial listing on Nasdaq, we fail to satisfy
the continued listing requirements of The Nasdaq Capital Market,
such as the corporate governance requirements or the minimum
closing bid price requirement, the Nasdaq Stock Market
(“Nasdaq”) may take steps to de-list our Common Stock.
Such a de-listing or the announcement of such de-listing will have
a negative effect on the price of our Common Stock and would impair
your ability to sell or purchase our Common Stock when you wish to
do so. In the event of a de-listing, we would take actions to
restore our compliance with the Nasdaq listing requirements, but we
can provide no assurance that any such action taken by us would
allow our Common Stock to become listed again, stabilize the market
price or improve the liquidity of our Common Stock, prevent our
Common Stock from dropping below the Nasdaq minimum bid price
requirement or prevent future non-compliance with the Nasdaq
listing requirements.
If our shares become subject to the penny stock rules, it would
become more difficult to trade our shares.
The SEC
has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00 per
share, other than securities registered on certain national
securities exchanges or authorized for quotation on certain
automated quotation systems, provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system. If we do not obtain or retain a
listing on The Nasdaq Capital Market and if the price of our Common
Stock is less than $5.00 per share, our Common Stock will be deemed
a penny stock. The penny stock rules require a broker-dealer,
before a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document
containing specified information. In addition, the penny stock
rules require that before effecting any transaction in a penny
stock not otherwise exempt from those rules, a broker-dealer must
make a special written determination that the penny stock is a
suitable investment for the purchaser and receive (i) the
purchaser’s written acknowledgment of the receipt of a risk
disclosure statement; (ii) a written agreement to transactions
involving penny stocks; and (iii) a signed and dated copy of a
written suitability statement. These disclosure requirements may
have the effect of reducing the trading activity in the secondary
market for our Common Stock, and therefore stockholders may have
difficulty selling their shares.
There has been no prior public market for our Common Stock, the
stock price of our Common Stock may be volatile or may decline
regardless of our operating performance and you may not be able to
resell your shares at or above the initial public offering
price.
There has been no public market for our Common
Stock prior to this offering. The initial public offering price for
our Common Stock will be determined through negotiations between
the underwriters and us and may vary from the market price of our
Common Stock following this offering. If you purchase shares of our
Common Stock in this offering, you may not be able to resell those
shares at or above the initial public offering price. An active or
liquid market in our Common Stock may not develop upon the
completion of this offering or, if it does develop, it may not be
sustainable.
The
market prices for securities of biotechnology and pharmaceutical
companies have historically been highly volatile, and the market
has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of
particular companies.
The
market price of our common stock is likely to be highly volatile
and may fluctuate substantially due to many factors,
including:
●
announcements
concerning the progress and success of our clinical trials, our
ability to obtain regulatory approval for and commercialize our
product candidates, including any requests we receive from the FDA
for additional studies or data that result in delays in obtaining
regulatory approval or launching our product candidates, if
approved;
●
market conditions
in the pharmaceutical and biotechnology sectors or the economy as a
whole;
●
price and volume
fluctuations in the overall stock market;
●
the failure of our
product candidates, if approved, to achieve commercial
success;
●
announcements of
the introduction of new products by us or our
competitors;
●
developments
concerning product development results or intellectual property
rights of others;
●
litigation or
public concern about the safety of our potential
products;
●
actual fluctuations
in our quarterly operating results, and concerns by investors that
such fluctuations may occur in the future;
●
deviations in our
operating results from the estimates of securities analysts or
other analyst comments;
●
additions or
departures of key personnel;
●
healthcare reform
legislation, including measures directed at controlling the pricing
of pharmaceutical products, and third-party coverage and
reimbursement policies;
●
developments
concerning current or future strategic collaborations;
and
●
discussion of us or
our stock price by the financial and scientific press and in online
investor communities.
Investors in this Offering will suffer immediate and substantial
dilution of their investment.
If you
purchase our Common Stock in this Offering, you will pay more for
your shares than our as adjusted net tangible book value per share.
Based upon an assumed initial public offering price of $9.00 per
share, the midpoint of the price range on the cover page of this
prospectus, you will incur immediate and substantial dilution of
$6.97 per share, representing the difference between
our assumed initial public offering price and our as adjusted net
tangible book value per share.
We may become involved in securities class action litigation that
could divert management’s attention and harm our
business.
The
stock markets have from time to time experienced significant price
and volume fluctuations that have affected the market prices for
the common stock of biotechnology and pharmaceutical companies.
These broad market fluctuations may cause the market price of our
stock to decline. In the past, securities class action litigation
has often been brought against a company following a decline in the
market price of its securities. This risk is especially relevant
for us because biotechnology and biopharmaceutical companies have
experienced significant stock price volatility in recent years. We
may become involved in this type of litigation in the future.
Litigation often is expensive and diverts management’s
attention and resources, which could adversely affect our
business.
Substantial amounts of our outstanding shares may be sold into the
market when lock-up or market standoff periods end. If there are
substantial sales of shares of our Common Stock, the price of our
Common Stock could decline.
The
price of our Common Stock could decline if there are substantial
sales of our Common Stock, particularly sales by our directors,
executive officers and significant stockholders, or if there is a
large number of shares of our Common Stock available for sale and
the market perceives that sales will occur. After this offering, we
will have 11,513,644 outstanding shares of our Common
Stock, based on the number of shares outstanding as of
November 4, 2019. All of the shares of Common Stock
sold in this offering will be available for sale in the public
market. The overwhelming majority of all of our outstanding shares
of Common Stock are currently restricted from resale as a result of
market standoff and “lock-up” agreements, as more fully
described in “Shares Eligible for Future Sale.”
These shares will become available to be sold 181 days after the
date of this prospectus. Shares held by directors, executive
officers and other affiliates will be subject to volume limitations
under Rule 144 under the Securities Act of 1933, as amended
(Securities Act), and various vesting agreements.
After
this offering, certain of our stockholders will have rights,
subject to some conditions, to require us to file registration
statements covering their shares or to include their shares in
registration statements that we may file for ourselves or our
stockholders, subject to market standoff and lock-up agreements. We
also intend to register shares of Common Stock that we have issued
and may issue under our employee equity incentive plans. Once we
register these shares, they will be able to be sold freely in the
public market upon issuance, subject to existing market standoff or
lock-up agreements. The market price of the shares of our Common
Stock could decline as a result of the sale of a substantial number
of our shares of Common Stock in the public market or the
perception in the market that the holders of a large number of
shares intend to sell their shares.
We have broad discretion in the use of the net proceeds from this
offering, and our use of those proceeds may not yield a favorable
return on your investment.
We
intend to use approximately $10-15 million of the net
proceeds from this offering to fund the preparation, initiation and
maintenance of our Validive Phase 3 clinical program including
additional clinical material manufacturing, clinical research
organization (“CRO”) costs to oversee and commence the
global, adaptive design clinical trial and to fund the expansion of
our clinical, regulatory, quality and manufacturing expertise
through direct hires and through consultants. We intend to use
approximately $4-8 million for manufacturing and
support of the GEIS-sponsored Phase 2 clinical trial for
camsirubicin and for further development of MNPR-101. We intend to
use the remaining net proceeds from the sale of the shares in the
offering, along with available cash, for general corporate
purposes, which may include advancing our other pipeline programs,
acquiring or licensing additional compounds for our drug
development pipeline, maintaining existing and prosecuting new
intellectual property protection, supporting the requirements of
being a public company, including legal, audit, investor relations
and board fees and providing competitive salaries and benefits to
attract and retain highly qualified employees. We have not
specifically allocated the amount of net proceeds that will be used
for these purposes, and our management will have broad discretion
over how these proceeds are used and could spend the proceeds in
ways with which you may not agree. In addition, we may not use the
proceeds of this offering effectively or in a manner that increases
our market value or enhances our profitability. We have not
established a timetable for the effective deployment of the
proceeds, and we cannot predict how long it will take to deploy the
proceeds.
Our ability to use our net operating loss carry-forwards and
certain other tax attributes may be limited.
Under
Section 382 of the Code, if a corporation undergoes an
“ownership change” (generally defined as a greater than
50% change, by value, in its equity ownership over a three-year
period), the corporation’s ability to use its pre-change net
operating loss carry-forwards and other pre-change tax attributes
(such as research tax credits) to offset its post-change income may
be limited. We believe that additional fundraising efforts in the
next three years, may trigger an “ownership change”
limitation in the near future. As a result, if we earn net taxable
income, our ability to use our pre-change net operating loss
carry-forwards to offset U.S. federal taxable income will be
subject to limitations, which could result in increased future
tax liability to us had
we not been subject to such limitations.
If securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our common stock would depend in part on the
research and reports that securities or industry analysts publish
about us or our business. Securities and industry analysts do not
currently, and may never, publish research on our Company. If
securities or industry analysts do not commence coverage of our
Company, the trading price for our stock would likely be negatively
impacted. In the event securities or industry analysts initiate
coverage, if one or more of the analysts who covers us downgrades
our stock or publishes inaccurate or unfavorable research about our
business, our stock price may decline. If one or more of these
analysts ceases coverage of our Company or fails to publish reports
on us regularly, demand for our stock could decrease, which might
cause our stock price and trading volume to decline.
An active trading market for our common stock may not
develop.
Prior
to this offering, there has been no public market for our common
stock. The initial public offering price for our common stock will
be determined through negotiations with the underwriters. Although
we have applied to list our common stock on the Nasdaq Capital
Market, an active trading market for our shares may never develop
or be sustained following this offering. If an active market for
our common stock does not develop, it may be difficult for you to
sell shares you purchase in this offering without depressing the
market price for the shares, or at all.
We do not intend to pay dividends for the foreseeable future and,
as a result, your ability to achieve a return on your investment
will depend on appreciation in the price of our Common
Stock.
We have
never declared or paid any cash dividends on our capital stock and
we do not intend to pay any cash dividends in the foreseeable
future. Any determination to pay dividends in the future will be at
the discretion of our Board. Accordingly, investors must rely on
sales of their common stock after price appreciation, which may
never occur, as the only way to realize any future gains as a
return on their investments.
There can be no assurance that we will ever provide liquidity to
our investors through a sale of our Company.
While
acquisitions of pharmaceutical companies like ours are not
uncommon, potential investors are cautioned that no assurances can
be given that any form of merger, combination, or sale of our
Company will take place or that any merger, combination, or sale,
even if consummated, would provide liquidity or a profit for our
investors. You should not invest in our Company with the
expectation that we will be able to sell the business in order to
provide liquidity or a profit for our investors.
Delaware law and provisions in our amended and restated bylaws
could make a merger, tender offer or proxy contest difficult,
thereby depressing the potential trading price of our Common
Stock.
Anti-takeover
provisions in our charter documents and under Delaware law could
make an acquisition of us difficult, limit attempts by our
stockholders to replace or remove our current management or Board
and adversely affect our stock price.
Provisions
of our amended and restated bylaws may delay or discourage
transactions involving an actual or potential change in our control
or change in our management, including transactions in which
stockholders might otherwise receive a premium for their shares, or
transactions that our stockholders might otherwise deem to be in
their best interests. Therefore, these provisions could adversely
affect the price of our stock. Among other things, our amended and
restated bylaws:
●
provide that all
vacancies on our Board may only be filled by our Board and not by
stockholders;
●
allow the holders
of a plurality of the shares of common stock entitled to vote in
any election of directors to elect all of the directors standing
for election, if they should so choose; and
●
provide that
special meetings of our stockholders may be called only by our
Board.
In
addition, because we are incorporated in Delaware, we are governed
by the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with
any “interested” stockholder for a period of three
years following the date on which the stockholder became an
“interested” stockholder.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This
Prospectus contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Act”) and Section 21E of the 34 Act. All
statements other than statements of historical facts included in
this Prospectus are forward-looking statements. The words
“hopes,” “believes,”
“anticipates,” “plans,”
“seeks,” “estimates,”
“projects,” “expects,”
“intends,” “may,” “could,”
“should,” “would,” “will,”
“continue,” and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
contained in this Prospectus include without limitation statements
about the market for cancer products in general and statements
about our:
●
risks and
uncertainties associated with our research and development
activities, including our clinical trials;
●
estimated
timeframes for our clinical trials;
●
plans to research,
develop and commercialize our current and future product
candidates;
●
the rate and degree
of market acceptance and clinical utility of any products for which
we receive marketing approval;
●
commercialization,
marketing and manufacturing capabilities and strategy;
●
intellectual property position and
strategy;
●
use of proceeds
from this offering;
●
future financial
performance;
●
estimates regarding
expenses, capital requirements and need for additional
financing;
●
the impact of
government laws and regulations;
●
ability to attract
and retain key personnel;
●
financial and
operational projections; and
●
other risks and
uncertainties, including those listed under the caption “Risk
Factors.”
Although we believe
that the expectations reflected in such forward-looking statements
are appropriate, we can give no assurance that such expectations
will be realized. Cautionary statements are disclosed in this
prospectus, including without limitation statements in the section
entitled “Risk Factors,” addressing forward-looking
statements. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements.
We undertake no obligation to update any statements made in this
Prospectus or elsewhere, including without limitation any
forward-looking statements, except as required by law.
You
should read this prospectus and the documents that we reference in
this prospectus and have filed with the SEC as exhibits to the
registration statement of which this prospectus is a part with the
understanding that our actual future results, levels of activity,
performance and events and circumstances may be materially
different from what we expect.
INDUSTRY
AND MARKET DATA
This
prospectus includes industry and market data that we obtained from
numerous sources such as periodic industry publications and
third-party studies. These sources include government and industry
sources. Industry publications and surveys generally state that the
information contained therein has been obtained from sources
believed to be reliable. Although we believe the industry and
market data to be reliable as of the date of this prospectus, this
information could prove to be inaccurate. Industry and market data
could be wrong because of the method by which sources obtained
their data and because information cannot always be verified with
complete certainty due to the limits on the availability and
reliability of raw data, the voluntary nature of the data gathering
process and other limitations and uncertainties. In addition, we do
not know all of the assumptions or forecasting methodologies that
were used in preparing the forecasts from the sources relied upon
or cited herein.
We
estimate that the net proceeds to us from the sale of the shares of
our Common Stock in this offering will be approximately
$18.3 million, based upon an assumed initial public
offering price of $9.00 per share, the midpoint of the price range
set forth on the cover page of this prospectus, and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
We
currently estimate that we will use the net proceeds from this
offering as follows:
●
Approximately
$10-15 million to advance our global Phase 3 clinical
program for Validive, including building our clinical, regulatory
and manufacturing team to support the program. Proceeds from this
offering are intended to advance Validive
to the interim results of the adaptive design clinical
trial.
●
Approximately
$4-8 million for manufacturing and support of the
GEIS-sponsored Phase 2 clinical trial for camsirubicin, and for
further development of MNPR-101.
●
The remainder for
general corporate purposes. We will need to raise additional funds
to complete the Validive clinical trial program through potential
approval and, if approved, through commercialization, to support
further development of camsirubicin and MNPR-101, and to expand our
product pipeline.
However,
due to the uncertainties inherent in the product development
process, it is difficult to estimate with certainty the exact
amounts of the net proceeds from this offering that may be used for
the above purposes. Our management will have broad discretion over
the use of the net proceeds from this offering. The amounts and
timing of our expenditures will depend upon numerous factors
including the results of our research and development efforts, the
timing and success of preclinical studies and clinical trials we
commence now or in the future, the timing of regulatory submissions
and the amount of cash obtained through future collaborations, if
any. Following this offering, we will require additional funding in
order to complete clinical development and commercialize our lead
product candidate, Validive, and complete the clinical development
of any additional product candidates.
We believe opportunities may exist from time to
time to expand our current business through investments,
acquisitions or in-licenses of complementary companies,
medicines or technologies. While we have no current agreements,
commitments or understandings for any specific investments,
acquisitions or in-licenses at this time, we may use a portion
of the net proceeds for these purposes. Pending the uses
described above, we will invest the net proceeds in short-term and
long-term, investment grade, interest-bearing
securities.
Each
$1.00 increase (decrease) in the assumed initial public offering
price of $9.00 per share would increase (decrease) the net proceeds
to us from this offering by approximately $2.1
million, assuming the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same. We may also
increase or decrease the number of shares we are offering. Each
increase (decrease) of 100,000 shares in the number of shares
offered by us would increase (decrease) the net proceeds to us from
this offering by approximately $0.8 million, assuming that the
assumed initial public offering price remains the same, and after
deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. We do not expect that a
change in the initial public offering price or the number of shares
by these amounts would have a material effect on our uses of the
proceeds from this offering, although it may accelerate the time at
which we will need to seek additional capital.
DIVIDEND POLICY
We
have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and future earnings,
if any, for use in the operation of our business and do not
anticipate paying any cash dividends on our Common Stock in the
foreseeable future. Any future determination to declare and pay
dividends will be made at the discretion of our Board and will
depend on various factors, including applicable laws, our results
of operations, our financial condition, our capital requirements,
general business conditions, our future prospects and other factors
that our Board may deem relevant. Additionally, our ability to pay
dividends on our capital stock could be limited by terms and
covenants of any future indebtedness. Investors should not purchase
our Common Stock with the expectation of receiving cash
dividends.
The
following table sets forth our cash and cash equivalents and our
capitalization as of June 30, 2019, on:
●
an as adjusted
basis to reflect the issuance and sale of 2,222,223
shares of Common Stock pursuant to this offering at an assumed
initial public offering price of $9.00 per share, the midpoint of
the price range set forth on the cover page of this prospectus,
after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
You
should read this table in conjunction with the sections of this
prospectus entitled “Summary Financial Data,”
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and our consolidated
financial statements and related notes included elsewhere in this
prospectus.
(in thousands)
|
|
|
|
|
Cash and Cash
Equivalents
|
$5,130
|
$ 23,380
|
Stockholders’
Equity
|
|
|
Common Stock, par value of $0.001 per share,
40,000,000 authorized, 9,291,421 shares issued and outstanding at
June 30, 2019; 11,513,644 shares issued and
outstanding, As Adjusted
|
9
|
11
|
Additional Paid in Capital – As
Adjusted(1)
|
29,059
|
47,307
|
Accumulated Other Comprehensive
Loss
|
(3)
|
(3)
|
Accumulated Deficit
|
(23,938)
|
(23,938)
|
Total
Stockholders’ Equity
|
5,127
|
23,377
|
Total
Capitalization
|
5,127
|
23,377
|
A $1.00
increase (decrease) in the assumed initial public offering price of
$9.00 per share, which is the midpoint of the price range listed on
the cover page of this prospectus, would increase (decrease) each
of cash and cash equivalents, additional paid-in capital, total
stockholders’ equity and total capitalization on an As
Adjusted basis by approximately $2.1 million, assuming
that the number of shares offered by us, as set forth on the cover
page of this prospectus, remains the same and after deducting
estimated legal, audit and travel costs and underwriting discounts
and commissions.
(1)
Net of
$1.8 million estimated fundraising costs related to
this financing
If you
invest in our Common Stock in this offering, your ownership
interest will be diluted to the extent of the difference between
the offering price per share of our Common Stock and the as
adjusted net tangible book value per share of our Common Stock
immediately after the offering. Historical net tangible book value
per share represents the amount of our total tangible assets less
total liabilities, divided by the number of shares of our Common
Stock outstanding.
Our
historical net tangible book value as of June 30, 2019, was $5.1
million, or $0.55 per share of our Common Stock.
After
giving effect to our issuance and sale of $20 million
of shares of our Common Stock in this offering at the assumed
initial public offering price of $9.00 per share, which is the
midpoint of the price range set forth on the cover page of this
Prospectus, and after deducting underwriting discounts and
commissions and estimated offering expenses payable by us, our as
adjusted net tangible book value as of June 30, 2019, would have
been $23.4 million, or $2.03 per share.
This represents an immediate increase in net tangible book value
per share of $1.48 to existing stockholders and
immediate dilution of $6.97 in net tangible book value
per share to new investors purchasing common stock in this
offering.
Dilution per share
to new investors is determined by subtracting as adjusted net
tangible book value per share after this offering from the offering
price per share paid by new investors. The following table
illustrates this dilution on a per share basis.
Assumed Initial
Public Offering Price Per Share
|
|
$ 9.00
|
Historical Net Tangible Book Value Per Share as
of June 30, 2019
|
$0.55
|
|
Increase in Net
Tangible Book Value Per Share Attributable to New
Investors
|
1.48
|
|
As Adjusted Net
Tangible Book Value Per Share After this Offering
|
|
2.03
|
Dilution Per Share
to New Investors
|
|
$ 6.97
|
If the
underwriters exercise the option to purchase an additional
$3,000,000 of shares of our Common Stock in full (at
the assumed initial offering price of $9.00 per share), the as
adjusted net tangible book value per share, after giving effect to
the offering, would be $2.21 per share. This
represents an immediate increase in as adjusted net tangible book
value of $1.66 per share to existing stockholders and
an immediate dilution in as adjusted net tangible book value of
$6.79 per share to new investors purchasing Common
Stock in this offering. Moreover, if any additional shares are
issued in connection with outstanding options, you will experience
further dilution. In addition, we may choose to raise additional
capital due to market conditions or strategic considerations, even
if we believe we have sufficient funds for our current or future
operating plans. To the extent that additional capital is raised
through the sale of equity or convertible debt securities, the
issuance of these securities may result in further dilution to our
stockholders.
Each
$1.00 increase (decrease) in the assumed initial public offering
price of $9.00 per share would increase (decrease) our net tangible
book value after this offering by approximately $2.1
million, or approximately $0.18 per share, and
increase (decrease) the dilution per share to new investors by
approximately $6.79 per share, assuming that the
number of shares offered by us, as set forth on the cover page of
this prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. An increase of 100,000 shares in the number
of shares offered by us would increase our net tangible book value
after this offering by approximately $0.8 million, or
$0.05 per share, and increase the dilution per share
to new investors by approximately $6.91 per share,
assuming that the assumed public offering price remains the same,
and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
Similarly, a decrease of 100,000 shares in the number of shares
offered by us in the assumed initial public offering would decrease
our net tangible book value after this offering by approximately
$0.8 million, or $0.06 per share, and decrease the
dilution per share to new investors by approximately
$7.03 per share, assuming that the assumed public
offering price remains the same, and after deducting the estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial
condition and results of operations together with our condensed
consolidated financial statements and related notes appearing at
the end of this prospectus. Some of the information contained in
this discussion and analysis or set forth elsewhere in this
prospectus, including information with respect to our plans and
strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties.
You should read the “Risk Factors” section of this
prospectus for a discussion of important factors that could cause
actual results to differ materially from the results described in
or implied by the forward-looking statements contained in the
following discussion and analysis.
Overview
Our
mission is to develop new drugs and drug combinations to improve
clinical outcomes for cancer patients. We are building a drug
development pipeline through the licensing or acquisition of
oncology therapeutics at the late preclinical through advanced
clinical development stage.
Validive is being
developed for the treatment of chemoradiation-induced SOM. SOM is a
frequent major adverse side effect for patients with head and neck
cancer who receive chemoradiation treatment. SOM causes intense
oral pain and limits a patient’s ability to eat and drink,
which causes additional treatment complications. Many affected
patients require hospitalization and the SOM symptoms can force
patients to stop cancer treatments early, which reduces the success
of treatments. Validive is designed to deliver the active
ingredient, clonidine, to the at-risk oropharyngeal mucosa.
Clonidine reduces the production of cytokines, the molecules that
cause ulcerations and pain in patients that develop SOM.
Preclinical studies and a Phase 2 clinical trial have demonstrated
that Validive has the potential for reducing the incidence,
delaying the time to onset, and decreasing the duration of SOM in
those who do develop it, as compared to a placebo. Additionally,
patients in the Validive cohorts in the Phase 2 clinical trial
demonstrated a safety profile similar to that of placebo. On
September 8, 2017, we exercised our exclusive option to license
Validive in order to advance its development with the near-term
goal of commencing a Phase 3 clinical program. If successful, this
Phase 3 clinical program may allow us to apply for marketing
approval both in the U.S. and internationally. See “Business
– Partnerships, Licensing and Acquisition” and
“Strategy”.
In
August 2017, we acquired camsirubicin (5-imino-13-deoxydoxorubicin;
formerly MNPR-201, GPX-150) from TacticGem, LLC. Camsirubicin is a proprietary analog of
doxorubicin that is selective for topoisomerase II-alpha, and has
been engineered specifically to retain the anticancer activity of
doxorubicin while minimizing toxic effects on the heart. It has
completed a Phase 2 clinical trial in advanced soft tissue sarcoma
("ASTS") patients, with initial evidence of anti-tumor activity and
no irreversible cardiotoxicity observed. Based on encouraging clinical results to
date, we plan to continue the development of camsirubicin as first
line treatment in patients with ASTS, where the current first line
treatment is doxorubicin. The aim is to administer camsirubicin
without restricting cumulative dose, thereby potentially improving
efficacy by keeping patients on treatment who are responding. In
June 2019, we entered into a clinical collaboration with Grupo
Español de Investigación en Sarcomas
(“GEIS”). GEIS will lead a multi-country, randomized,
open-label Phase 2 clinical trial evaluating camsirubicin
head-to-head against doxorubicin in patients with
ASTS.
MNPR-101 is our
product candidate designed to reduce tumor growth by targeting a
specific receptor, uPAR, which is present in a range of tumor
types, including pancreatic and ovarian tumors. uPAR is part of the
normal cell repair process in non-cancerous cells; however, in
cancerous cells the tumor hijacks uPAR to help the tumor grow and
spread. Preclinical models have shown that MNPR-101 is effective at
reducing tumor growth, both used alone and in combination with
existing therapies. We are currently reviewing potential clinical
development opportunities for MNPR-101.
Over
the next three years, we plan to execute our Phase 3 clinical
program for Validive, support the GEIS-sponsored randomized Phase 2
trial of camsirubicin in patients with ASTS, pursue collaboration
opportunities for MNPR-101, raise additional capital to fund our
drug development programs, acquire or in-license additional product
candidates, and promote public and biotech investor awareness of
us.
Developing a new
drug and conducting clinical trials for one or more disease
indications involves substantial costs and resources. Our operating
and financial strategy for the development, clinical testing,
manufacture and commercialization of product candidates is heavily
dependent on our entering into collaborations with corporations,
non-profits, scientific institutions, licensors, licensees and
other parties, which enables us to utilize their financial and
other resources to assist in our drug development. See “Risk
Factors – Risks Related to our Reliance on Third
Parties”. Additionally, we will need to raise significant
additional funds in the next 12-18 months to continue
our clinical development of Validive and potential approval and
commercialization plans, continue to support the GEIS-sponsored
Phase 2 clinical trial for camsirubicin and continue development of
MNPR-101. We believe that we will have better access to capital as
a stock trading public reporting company and if a
trading market develops for our stock. This would increase
corporate visibility, provide increased liquidity for our
stockholders, and create a market value for our pipeline of
oncology product candidates. Therefore, we became a public
reporting company under the Securities Exchange Act of 1934 (the
“34 Act”) through the filing of a Form 10 registration
statement with the SEC. Simultaneous with closing this
offering, we have been approved to list on the Nasdaq
Stock Market (“Nasdaq”). There can be no assurance that
we will be successful in creating an active market for our stock if
we close this offering and successfully list on Nasdaq. See
“Risk Factors – Risks Related to Our Financial
Condition and Capital Requirements”, and “Risks Related
to Our Business Operations and Industry”.
Revenues
We are
an emerging growth company, have no approved drugs and have not
generated any revenues. To date, we
have engaged in acquiring pharmaceutical drug product candidates,
licensing rights to drug product candidates, entering into
collaboration agreements for testing and clinical development of
our drug product candidates and providing the infrastructure to
support the clinical development of our drug product candidates. We
do not anticipate commercial revenues from operations until we
complete testing and development of one of our drug product
candidates and obtain marketing approval or we sell, enter into a
collaborative marketing arrangement, or out-license one of our drug
product candidates to another party. See “Liquidity and
Capital Resources”.
Conversion
of Preferred Stock to Common Stock
In
March 2017, holders of a majority in interest of our Series A
Preferred Stock and holders of a majority in interest of our Series
Z Preferred Stock voted to adopt the Second Amended and Restated
Certificate of Incorporation of the Company (the “Certificate
of Incorporation”). When the Certificate of Incorporation
took effect, each share of Series A Preferred Stock was
automatically converted into 84 shares of common stock of the
Company (a 1.2 for 1 conversion to common stock concurrent with a
70 for 1 stock split) and each share of Series Z Preferred Stock
was automatically converted into 70 shares of common stock of the
Company (a 1 for 1 conversion to common stock concurrent with a 70
for 1 stock split) and Series A Preferred Stock and Series Z
Preferred Stock were eliminated (the “Conversion”).
100,000 shares of Series Z Preferred Stock were converted into
7,000,000 shares of common stock and 15,894 shares of Series A
Preferred Stock were converted into 1,335,079 shares of common
stock. All references in this “Management’s Discussion
and Analysis of Financial Conditions and Results of
Operations” to common stock authorized, issued and
outstanding and common stock options take into account the stock
split that occurred as part of the Conversion.
Recently
Issued and Adopted Accounting Pronouncements
A
description of recently issued accounting pronouncements that may
potentially impact our financial position and condensed
consolidated results of operations is disclosed in Note 2 to our
condensed consolidated financial statements appearing elsewhere in
this prospectus.
Critical
Accounting Policies and Use of Estimates
While
our significant accounting policies are described in more detail in
Note 2 of our condensed consolidated financial statements included
elsewhere in this prospectus, we believe the following accounting
policies to be critical to the judgments and estimates used in the
preparation of our condensed consolidated financial
statements.
Research and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of R&D expenses include salaries and benefits
of R&D staff, stock-based compensation related to stock options
granted to our R&D team, fees paid to consultants and to the
entities that conduct certain development activities on our behalf
and materials and supplies used in R&D activities.
We
accrue and expense the costs for clinical trial activities
performed by third parties based upon estimates of the percentage
of work completed over the life of the individual study in
accordance with agreements established with contract research
organizations and clinical trial sites. We determine the estimates
through discussions with internal clinical personnel and external
service providers as to progress or stage of completion of trials
or services and the agreed upon fee to be paid for such services.
Costs of setting up clinical trial sites for participation in the
trials are expensed immediately as R&D expenses. Clinical trial
site costs related to patient enrollment are accrued as patients
are entered into the trial. During the three and six months ended
June 30, 2019, and the years ended December 31, 2018 and 2017, we
had no clinical trials in progress.
The
successful development of our product pipeline is highly uncertain.
We cannot precisely or accurately estimate the nature, timing or
costs of the efforts that will be necessary to complete the
remainder of the development of any of our drug product candidates
or the period, if any, in which material net cash inflows from our
drug product candidates may commence. This is due to the numerous
risks and uncertainties associated with developing drug product
candidates, including:
●
receiving less
funding than the drug product programs require;
●
slower than
expected progress in developing Validive, camsirubicin, MNPR-101 or other drug
product candidates;
●
higher than
expected costs to produce, test, package, warehouse and distribute
our current and future drug product candidates;
●
higher than
expected costs for preclinical testing of our current and future
acquired and/or in-licensed programs;
●
future clinical
trial costs, including requirements for increases in the number of
patients, clinical sites, size, duration, testing requirements, or
complexity of future clinical trials;
●
future clinical
trial results;
●
higher than
expected costs associated with attempting to obtain regulatory
approvals, including without limitation additional costs caused by
delays and additional clinical testing mandated by regulatory
authorities;
●
higher than
expected personnel or other costs, such as adding personnel or
engaging consultants;
●
higher than
expected costs in pursuing the acquisition or licensing of
additional assets;
●
higher than
expected costs to protect our intellectual property portfolio or
otherwise pursue our intellectual property strategy;
●
lower benefits of
our drug product candidates compared to other competitive
therapies; and
●
our ability to
market, commercialize and achieve market acceptance sufficient to
provide financial returns acceptable for future requirements and
financial returns for our investors for any of our drug product
candidates that we are developing or may develop in the
future.
There
are other risks described in “Risk Factors”. A change
in the outcome of any of these and other additional variables with
respect to the development of a drug product candidate could mean a
significant change in the costs and timing associated with the
development of that drug product candidate. We expect that R&D
expenses will increase in future periods as a result of current
product candidates entering more expensive stages of development
and additional current and future product candidate programs under
development which will require increased personnel, increased
consulting, future preclinical studies and clinical trial costs,
including clinical drug product manufacturing and related
costs.
General and Administrative Expenses
General
and administrative expenses consist primarily of compensation and
expenses for our executive personnel who perform corporate and
administrative functions, stock-based compensation expense related
to stock options granted to our executive team, legal and audit
expenses, general and administrative consulting, board fees and
expenses, patent legal and application fees, and facilities and
related expenses. Future general and administrative expenses may
also include: compensation and expenses related to the employment
of personnel or engagement of consultants in the areas of finance,
human resources, information technology, business development,
legal, compliance, investor relations and others, depreciation and
amortization of general and administrative fixed assets, investor
relations and annual meeting expense, and stock-based compensation
expense related to general and administrative personnel. We expect
that our general and administrative expenses will increase in
future periods as a result of increased personnel, expanded
infrastructure, increased consulting, legal, accounting/auditing,
investor relations and other expenses associated with being a
public company, costs incurred to seek and establish collaborations
with respect to any of our drug product candidates and costs
required to find and acquire or license additional product
candidates to expand our product pipeline.
Stock-Based Compensation
We
account for stock-based compensation arrangements with employees,
non-employee directors and consultants using a fair value method,
which requires the recognition of compensation expense for costs
related to all stock-based payments, including stock options. The
fair value method requires us to estimate the fair value of
stock-based payment awards on the date of grant using an option
pricing model.
Stock-based
compensation costs for options granted to our employees and
non-employee directors are based on the fair value of the
underlying option calculated using the Black-Scholes option-pricing
model on the date of grant for stock options and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
selecting methods for estimating our future stock price volatility,
forfeiture rates and expected term. The expected volatility rates
are estimated based on the actual volatility of comparable public
companies over recent historical periods of the same length as the
expected term. We generally selected these companies based on
comparable characteristics, including market capitalization, risk
profiles, stage of development and with historical share price
information sufficient to meet the expected term of the stock-based
awards. The expected term for options granted during the three and
six months ended June 30, 2019 and 2018 and the years ended
December 31, 2018 and 2017 was estimated using the simplified
method. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ
from those estimates. We have not paid dividends and do not
anticipate paying a cash dividend in future vesting periods and,
accordingly, use an expected dividend yield of zero. The risk-free
interest rate is based on the rate of U.S. Treasury securities with
maturities consistent with the estimated expected term of the
awards. Prior to January 1, 2019, the measurement of consultant
stock-based compensation was subject to periodic adjustments as the
underlying equity instruments vest. Since January 1, 2019,
consultant stock-based compensation is valued on the grant date and
is recognized as an expense over the period during which services
are rendered.
Stock Option Plan
In
April 2016, our Board and the preferred stockholders representing a
majority in interest of our outstanding stock approved the Amended
and Restated Monopar Therapeutics Inc. 2016 Stock Incentive Plan,
as subsequently amended (the “Plan”), allowing us to
grant up to an aggregate 700,000 shares of stock awards, stock
options, stock appreciation rights and other stock-based awards to
our employees, non-employee directors and consultants. In October
2017, our Board voted to increase the stock option pool to
1,600,000 shares which subsequently was approved by our
stockholders. Through February 2017, our Board granted to Board
Members, our Chief Financial Officer, and our Acting Chief Medical
Officer stock options to purchase up to an aggregate 555,520 shares
of our common stock at an exercise price of $0.001per share par
value, based upon third-party valuations of our common
stock.
In
September 2017, we granted stock options to purchase up to 21,024
shares of our common stock to each of the three new non-employee
Board Members and in November 2017, we granted stock options to
purchase up to 40,000 shares of our common stock to an employee.
These Board and employee options have an exercise price of $6 per
share based on the price per share at which our common stock was
sold in our most recent private offering.
In
January 2018, we granted options to purchase up to 32,004 shares of
our common stock to our acting Chief Medical Officer at an exercise
price of $6 per share based on the price per share at which our
common stock was sold in our most recent private offering. In May
2018 and August 2018, we granted stock options to purchase up to
5,000 shares of our common stock each to two employees at an
exercise price of $6 per share based on the price per share at
which our common stock was sold in our most recent private
offering. In August 2018, we granted stock options to all four of
our non-employee Board Members, our Chief Executive Officer, Chief
Scientific Officer, and Chief Financial Officer stock options to
purchase up to an aggregate 425,300 shares of our common stock at
an exercise price of $6 per share based on the price per share at
which our common stock was sold in our most recent private
offering. Vesting of such options commenced on October 1, 2018. In
December 2018, we granted stock options to purchase up to 20,000
shares of our common stock to our Acting Chief Medical Officer, at
an exercise price of $6 per share based on the price per share at
which our common stock was sold in our most recent private
offering. Vesting of such stock options commenced on January 1,
2019.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option is determined by a committee of our
Board, except that the per share exercise price cannot be less than
100% of the fair market value per share on the grant date. In
connection with our stock options issued in April 2016, December
2016, and February 2017, fair market value was established by our
Plan Administrator using recently obtained third-party valuation
reports. In connection with our stock options issued in September
2017, November 2017, January 2018, May 2018, August 2018 and
December 2018 fair market value was established by our Plan
Administrator Committee based on the price per share at which
common stock was sold in our most recent private offering. Options
generally expire after ten years.
During the three months ended June 30, 2019 and
2018, we recognized $164,600 and $26,362, respectively, of employee
and non-employee director stock-based compensation expense as
general and administrative expenses and $72,324 and $36,978,
respectively, as research and development expenses. During the six
months ended June 30, 2019 and 2018, and the years ended December
31, 2018 and 2017, we recognized $315,326, $52,514, $232,625 and
$26,864, respectively, of employee and non-employee director
stock-based compensation expense as general and administrative
expenses and $134,665, $76,726, $171,238 and $26,499, respectively,
as research and development expenses. The stock-based
compensation expense is allocated on a departmental basis, based on
the classification of the option holder. No income tax benefits
have been recognized in our condensed consolidated statements of
operations and comprehensive loss for stock-based compensation
arrangements.
We
recognize as an expense the fair value of options granted to
persons who are neither employees nor non-employee directors.
Stock-based compensation expense for
consultants which were recorded as research and development expense
for the three and six months ended June 30, 2019 was $20,708 and
$41,418, respectively. Stock-based compensation expense for
consultants which were recorded as research and development expense
for the three and six months ended June 30, 2018 was $25,230 and
$73,856, respectively. Stock-based compensation expense for
consultants for the years ended December 31, 2018 and 2017 were
$125,469 and $251,842, respectively of which $125,469 and
$199,769, respectively, was recorded as research and development
expenses and $0 and $52,073, respectively, as general and
administrative expenses.
The
fair value of options granted from inception to June 30, 2019 was
based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 1.2% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date was
estimated using the simplified method. There were no stock option
grants during the three and six months ended June 30, 2019. For the
three and six months ended June 30, 2018 and the years ended
December 31, 2018 and 2017, the weighted-average grant date fair
value was $3.30, $3.30, $2.05 and $0.88 per share, respectively.
For the three months ended June 30, 2019 and 2018, and the years
ended December 31, 2018 and 2017, the fair value of shares vested
was $349,409, $79,310, $391,689 and $312,895, respectively. At June
30, 2019, the aggregate intrinsic value was approximately $3.3
million of which approximately $2.6 million was vested and
approximately $0.7 million is expected to vest and the
weighted-average exercise price in aggregate was $2.99 which
includes $1.71 for fully vested stock options and $4.59 for stock
options expected to vest. At June 30, 2019, the unamortized
unvested balance of stock-based compensation was approximately $1.8
million, to be amortized over 2.6 years.
Stock
option activity under the Plan for the six months ended June 30,
2019 and the years ended December 31, 2018 and 2017 was as
follows:
|
|
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
|
Balances,
January 1, 2017
|
420,000
|
280,000
|
$0.001
|
Increase in option pool(1)
|
900,000
|
|
|
Granted(2)
|
(378,592)
|
378,592
|
1.63
|
Forfeited
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
Balances,
January 1, 2018
|
941,408
|
658,592
|
0.94
|
Granted(3)
|
(487,304)
|
487,304
|
6.00
|
Forfeited(4)
|
40,000
|
(40,000)
|
6.00
|
Exercised
|
-
|
-
|
-
|
Balances,
December 31, 2018
|
494,104
|
1,105,896
|
2.99
|
Granted
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
Balances,
June 30, 2019
|
494,104
|
1,105,896
|
2.99
|
(1)
In October 2017,
our Board voted to increase the option pool from 700,000 to
1,600,000 shares which subsequently was approved by our
stockholders.
(2)
336,544 options
vest 6/48ths at the six-month anniversary of grant date and
1/48th per
month thereafter; 21,024 options vest 6/24ths on the six-month
anniversary of grant date and 1/24th per month
thereafter; and 21,024 options vest 6/42nds on the six-month
anniversary of grant date and 1/42nd per month
thereafter.
(3)
32,004 options vest
as follows: options to purchase up to 12,000 shares of common stock
vest on the grant date, options to purchase up to 1,667 shares of
common stock vest on the 1st of each month
thereafter. 5,000 options vest 6/48ths on the grant date and
1/48th per
month thereafter. 5,000 options vest 6/48ths on the six-month
anniversary of grant date and 1/48th per month
thereafter. 320,900 options vest 6/51 at the six-month anniversary
of vesting commencement date and 1/51 per month thereafter, with
vesting commencing on October 1, 2018. 104,400 options vest
quarterly over 5 quarters, with the first quarter commenced October
1, 2018. 20,000 options vest as follows: options to purchase up to
1,667 shares of common stock vest on January 31, 2019 and the last
day of each month thereafter.
(4)
Forfeited options
resulted from an employee termination.
A
summary of options outstanding as of June 30, 2019 is shown
below:
|
Number of Shares Subject to Options Outstanding
|
Weighted Average Remaining Contractual Term
|
Number of Shares Subject to Options Fully Vested and
Exercisable
|
Weighted Average Remaining Contractual Term
|
$0.001
|
555,520
|
7.2
years
|
440,720
|
7.1
years
|
6.00
|
550,376
|
9.0
years
|
175,212
|
8.9
years
|
|
1,105,896
|
|
615,932
|
|
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2019 and June
30, 2018
The
following table summarizes the results of our operations for the
three and six months ended June 30, 2019 and 2018:
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
Research and
development expenses
|
329
|
493
|
(164)
|
1,165
|
950
|
215
|
General and
administrative expenses
|
603
|
347
|
256
|
1,175
|
787
|
388
|
|
932
|
840
|
92
|
2,340
|
1,737
|
603
|
|
|
|
|
|
|
|
|
(932)
|
(840)
|
(92)
|
(2,340)
|
(1,737)
|
(603)
|
Interest
income
|
26
|
19
|
7
|
58
|
40
|
18
|
Net
loss
|
$(906)
|
$(821)
|
$(85)
|
$(2,282)
|
$(1,697)
|
$(585)
|
Research and Development Expenses
Research and
Development (“R&D”) expenses for the three and six
months ended June 30, 2019 were approximately 329,000 and
$1,165,000, compared to approximately $493,000 and $950,000, for
the three and six months ended June 30, 2018. This represents a
decrease of approximately ($164,000) for the three-month variance,
and an increase of approximately $215,000 for the six-month
variance detailed as follows:
|
Three months ended June 30, 2019 versus three months ended June 30,
2018
|
R&D Expenses (in
thousands)
|
|
Increase in clinical materials manufactured for Validive Phase 3
clinical trial
|
$48
|
Increase in employee stock-based compensation (non-cash) due to
August 2018 stock
option grant to officer
|
35
|
Decrease in R&D travel
|
(10)
|
Decrease in consulting fees for regulatory consultants utilized in
2018 in preparation
for our meeting
with the FDA regarding Validive planning not
repeated in 2019
|
(63)
|
Decrease in CRO fees related to planning Phase 3 clinical trial not
repeated in Q2 2019
|
(68)
|
Decrease in R&D compensation primarily due to the departure of
our VP of Clinical
Development in June 2018
|
(98)
|
Other, net
|
(8)
|
Net decrease in R&D expenses
|
$(164)
|
|
Six months ended June 30, 2019 versus six months ended June 30,
2018
|
R&D Expenses (in
thousands)
|
|
Increase in CRO and related fees in preparation for Validive Phase
3 clinical trial in
Q1 2019
|
$334
|
Increase in clinical materials manufactured for Validive Phase 3
clinical trial
|
182
|
Increase in employee stock-based compensation (non-cash) due to
August 2018 stock
option grant to officer
|
58
|
Decrease in stock-based compensation (non-cash) to the Acting Chief
Medical Officer due to longer
vesting of stock options granted for 2019
|
(32)
|
Decrease in R&D compensation primarily due to the departure of
our VP of Clinical
Development in June 2018
|
(126)
|
Decrease in consulting fees for regulatory consultants utilized in
2018 in preparation
for our meeting with the FDA regarding Validive
planning not repeated in 2019
|
(192)
|
Other, net
|
(9)
|
Net increase in R&D expenses
|
$215
|
General and Administrative Expenses
General
and Administrative (“G&A”) expenses for the three
and six months ended June 30, 2019 were approximately $603,000 and
$1,175,000, compared to approximately $347,000 and $787,000, for
the three and six months ended June 30, 2018, which represent
increases of approximately $256,000 and $388,000. These increases
were primarily attributed to:
|
Three months ended June 30, 2019 versus three months ended June 30,
2018
|
G&A Expenses (in thousands)
|
|
Increase in Board
stock-based compensation (non-cash) due to August 2018
stock
option
grants to Board Members
|
$82
|
Increase
in audit fees due to increased scope and accounting
complexity
|
62
|
Increase in
employee stock-based compensation (non-cash) due to August
2018
stock
option grants to officers
|
56
|
Increase
in salaries and benefits due to 2019 cost of living adjustments
and
bonuses to G&A personnel
|
22
|
Increase in Board
fees for 2019 committee services
|
21
|
Other,
net
|
13
|
Net
increase in G&A expenses
|
$256
|
|
Six months ended June 30, 2019 versus six months ended June 30,
2018
|
G&A Expenses (in thousands)
|
|
Increase in Board
stock-based compensation (non-cash) due to August 2018 stock
option
grants
to Board Members
|
$164
|
Increase in
employee stock-based compensation (non-cash) due to August 2018
stock
option
grants to officers
|
98
|
Increase
in audit fees due to increased scope and accounting
complexity
|
76
|
Increase in Board
fees for 2019 committee services
|
44
|
Increase
in salaries and benefits due to 2019 cost of living adjustments and
bonuses to
G&A
personnel
|
39
|
Decrease
in G&A travel
|
(10)
|
Decrease
in patent expenses
|
(18)
|
Other,
net
|
(5)
|
Net
increase in G&A expenses
|
$388
|
Interest Income
Interest income for
the three months ended June 30, 2019 versus the three months ended
June 30, 2018 increased by approximately $7,000; and for the six
months ended June 30, 2019 versus the six months ended June 30,
2018 it increased by approximately $18,000, due to higher bank
interest rates on our money market account.
Comparison of the Years Ended December 31, 2018 and December 31,
2017
The
following table summarizes the results of our operations for the
years ended December 31, 2018 and 2017:
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Revenues
|
$—
|
$—
|
$—
|
|
|
|
|
Research and
development expenses
|
1,775
|
935
|
840
|
In-process research
and development expenses
|
—
|
14,502
|
(14,502)
|
General and
administrative expenses
|
1,628
|
1,166
|
462
|
|
|
|
|
Total
operating expenses
|
3,403
|
16,603
|
(13,200)
|
Loss
from operations
|
(3,403)
|
(16,603)
|
13,200
|
|
|
|
|
Interest
income
|
103
|
48
|
55
|
Loss
before income tax benefit
|
(3,300)
|
(16,555)
|
13,255
|
|
|
|
|
Income tax
benefit
|
72
|
—
|
72
|
Net
loss
|
$(3,228)
|
$(16,555)
|
$13,327
|
R&D Expenses
R&D
expenses for the year ended December 31, 2018 were approximately
$1,774,000, compared to approximately $935,000 for the year ended
December 31, 2017, an increase of approximately $840,000. This
increase was primarily attributed to:
|
Year ended December 31, 2018 versus year ended December 31,
2017
|
R&D Expenses (in thousands)
|
|
Net increase in
salaries and benefits due to CSO and VP of Clinical
Development
hired in November 2017, previously recorded as
consultants,
plus new hires in Q3 2018
|
$541
|
Increase in
clinical research organization fees, clinical consulting fees and
clinical materials
manufactured
Q3 2018 in preparation for the Validive Phase 3 clinical
trial
|
264
|
|
|
Increase in
employee stock compensation for CSO and VP of
Clinical
Development hired in November 2017
|
145
|
Increase in
CEO’s salary allocated to R&D expenses due to increase in
the CEO salary
|
16
|
Decrease in R&D
consulting fees related to the termination of two consulting
contracts obtained
in
the Gem Transaction
|
(51)
|
Decrease in
consultants stock compensation due to CSO’s
stock
options
classified as employee stock compensation commencing in November
2017
|
(74)
|
Other,
net
|
(1)
|
Net
increase in R&D expenses
|
$840
|
In-process Research and Development Expenses
There
were no in-process research and development
(“IPR&D”) expenses for the year ended December 31,
2018. IPR&D expenses for the year ended December 31, 2017 of
approximately $14,502,000 represent the $1,000,000 license fee for
Validive and approximately $13,502,000 represent the value of
camsirubicin, including transaction costs, acquired from TacticGem
in August 2017. IPR&D represents the costs of acquiring or
licensing technologies that have not reached technological
feasibility and have no alternative future use.
General and Administrative Expenses
General
and administrative (“G&A”) expenses for the year
ended December 31, 2018 were approximately $1,628,000, compared to
approximately $1,166,000 for the year ended December 31, 2017, an
increase of approximately $462,000. This increase was primarily
attributed to:
|
Year ended December 31, 2018 versus year ended December 31,
2017
|
G&A Expenses (in thousands)
|
|
Increase in
salaries and benefits for two new hires in November
2017
and increase in CEO salary in October 2017
|
$326
|
Increase in Board
stock-based compensation (non-cash) due to new
stock
grants to Board Members in September 2017
|
131
|
Increase in Board
fees and expenses due to compensation to three
non-employee
Board
Members commencing in September 2017
|
85
|
Increase in
employee stock-based compensation due to two new
hires
in November 2017
|
75
|
Increase in audit
and legal fees due to the public reporting company
status
commenced in January 2018
|
49
|
Increase in
Delaware franchise tax due to increase in the Company’s tax
basis
|
19
|
Increase in rent
and related telephone due to the increase in
facilities
space
commencing in January 2018
|
15
|
Increase in CEO
salary allocated to R&D due to salary increase
|
(16)
|
Decrease in
consulting fees due to the CFO hired as employee in
November
2017, previously recorded as consulting
|
(46)
|
Decrease in
stock-based compensation (non-cash) for consultants
due
to the CFO hired as employee in November 2017, previously recorded
as
consulting
|
(52)
|
Decrease in patent
legal fees in 2018
|
(97)
|
Other,
net
|
(27)
|
Net
increase in G&A expenses
|
$462
|
Interest Income
Interest
income for the year ended December 31, 2018 increased by
approximately $55,000 versus the year ended December 31, 2017 due
to higher bank balances resulting from funds raised in
2017. Interest income was related to interest earned on our
cash equivalent investments in two business savings accounts and on
our escrow account which closed in September 2018.
Income Tax Benefit
Income tax benefit for the year ended December 31,
2018 represents federal R&D credits expected to be applied
towards federal payroll tax expenses in
2019.
Liquidity and Capital Resources
Sources of Liquidity
We have
incurred losses and cumulative negative cash flows from operations
since our inception in December 2014 resulting in an accumulated
deficit of approximately $23.9 million as of June 30, 2019. We
anticipate that we will continue to incur losses for the
foreseeable future. We expect that our research and development and
general and administrative expenses will increase to enable the
execution of our strategic plan. As a result, we anticipate that we
will need to raise additional capital to fund our operations. We
will seek to obtain needed capital through a combination of equity
offerings, debt financings, strategic collaborations and grant
funding. From our inception through November 4, 2019,
we have financed our operations primarily through private
placements of our preferred stock and common stock, the $4.8
million received (net of transaction costs) related to the purchase
of camsirubicin in the Gem Transaction (as defined below), and the
shared expenses of our former Cancer Research UK collaboration. As
of November 4, 2019, we have received net proceeds of
approximately $4.7 million (net of issuance costs) from the sale of
our preferred stock which have been converted into common stock and
we sold 789,674 shares of our common stock for net proceeds of
approximately $4.7 million. We anticipate that the funds raised
to-date will fund our minimal operations through
December 2020.
We
invest our cash equivalents in a money market account.
Contribution to Capital
In
August 2017, our largest stockholder, Tactic Pharma, surrendered
2,888,727 shares of common stock back to us as a contribution to
the capital of the Company. This resulted in reducing Tactic
Pharma’s ownership in us at that time from 79.5% to
69.9%.
The Gem Transaction
On
August 25, 2017, Tactic Pharma and Gem formed a limited liability
company, TacticGem with Tactic Pharma contributing 4,111,273 shares
of our common stock and Gem contributing assets and $5 million in
cash before transaction costs. TacticGem then contributed the Gem
assets, including the intellectual property rights to camsirubicin,
(the “Gem Assets”) and cash to us in exchange for
3,055,394 shares of our common stock (the “Gem
Transaction”). This has resulted in TacticGem owning 77.1% of
our outstanding common stock as of November 4, 2019.
The contribution by TacticGem, made in conjunction with
contributions from outside investors in a private offering, was
intended to qualify for tax-free treatment.
It is
anticipated that future cash burn will increase by approximately $1
million to $2 million per year in support of the GEIS-sponsored
Phase 2 clinical trial for camsirubicin.
The Gem
Transaction was recorded on our financial statements for the year
ended December 31, 2017 as follows (in thousands):
Cash
recorded on our Balance Sheet
|
$5,000
|
Assembled
Workforce recorded as In-process Research and Development Expense
on our Statement of Operations
|
10
|
Camsirubicin (GPX-150) recorded as In-process
Research and Development Expense on our Statement of
Operations
|
13,492
|
Total
Gem Transaction
|
$18,502
|
Cash Flows
The
following table provides information regarding our cash flows for
the six months ended June 30, 2019 and 2018.
Cash
Flows (in thousands)
|
Six
months ended June 30,
(Unaudited)
|
|
|
|
|
Six months ended June 30, 2019 versus six months ended June 30,
2018
|
|
|
|
|
Cash used in
operating activities
|
$(1,736)
|
$(1,562)
|
$(174)
|
Cash
used in financing activities
|
(26)
|
—
|
(26)
|
Effect
of exchange rates on cash and cash equivalents
|
(1)
|
(1)
|
—
|
Net change in cash,
cash equivalents and restricted cash
|
$(1,763)
|
$(1,563)
|
$(200)
|
During
the six months ended June 30, 2019, we had a net cash outflow of
approximately $(1,763,000) primarily due to increased operating
activities compared to net cash outflow of approximately
$(1,563,000) due to operating activities during the six months
ended June 30, 2018.
Cash Flow Used in Operating Activities
The
increase of approximately $174,000 in cash flow used in operating
activities during the six months ended June 30, 2019, compared to
the six months ended June 30, 2018, was primarily a result of
R&D and G&A cash operating expenses as discussed
above.
Cash Flow Used in Investing Activities
There
was no cash flow used in investing activities for the six months
ended June 30, 2019 and 2018.
Cash Flow Used in Financing Activities
The
increase of approximately $26,000 in cash flow used in financing
activities for the six months ended June 30, 2019 compared to the
six months ended June 30, 2018, was primarily a result of deferred
offering costs incurred in 2019 related to a future
financing.
The
following table provides information regarding our cash flows for
the years ended December 31, 2018 and 2017.
Cash
Flow (in thousands)
|
|
Variance
year ended December 31, 2018
|
|
|
|
|
|
|
|
|
Cash used in
operating activities
|
$(2,887)
|
$(2,627)
|
$(260)
|
Cash provided by
financing activities
|
-
|
9,536
|
(9,536)
|
Effect of exchange
rates on cash and cash equivalents
|
(2)
|
-
|
(2)
|
Net change in cash,
cash equivalents and restricted cash
|
$(2,889)
|
$6,909
|
$(9,798)
|
During
the years ended December 31, 2018 and 2017, we had net cash
outflows of $(2,889,000) and net cash inflows of $6,909,000,
respectively.
Cash Flow Used in Operating Activities
The increase to cash flow
used in operating activities during the year ended December 31,
2018 compared to the year ended December 31, 2017 of approximately
$260,000 was primarily due to the increase in clinical development
expenses related to planning our Phase 3 clinical trial for
Validive. Cash flow used in operating activities of approximately
$(2,887,000) for the year ended December 31, 2018 was primarily a
result of our approximately $(3,200,000) net loss offset by
$529,000 of non-cash stock-based compensation less changes in
operating assets and liabilities of approximately $(116,000). Cash
flow used in operating activities of approximately $(2,627,000) for
the year ended December 31, 2017 was primarily a result of our
approximately $(16,555,000) net loss, offset by non-cash in-process
research and development of $13,502,000, non-cash stock-based
compensation of $305,000 and changes in operating assets and
liabilities of approximately $121,000.
Cash Flow Used in Investing Activities
There
was no cash flow provided by or used in investing activities for
the years ended December 31, 2018 and 2017.
Cash Flow Provided by Financing Activities
The
decrease of cash flow provided by financing activities during the
year ended December 31, 2018 compared to the year ended December
31, 2017 of approximately $9,536,000 was due to the sale of common
stock during the year ended December 31, 2017 at $6.00 per share
for aggregate net proceeds of approximately $4.7 million plus
approximately $4.8 million of net proceeds from the Gem
Transaction. There was no cash flow provided by financing
activities during the year ended December 31, 2018.
Future Funding Requirements
To
date, we have not generated any revenue from product sales. We do
not know when, or if, we will generate any revenue from product
sales. We do not expect to generate any revenue from product sales
unless and until we obtain regulatory approval of and commercialize
any of our current or future drug product candidates or we
out-license or sell a drug product candidate to another party. At
the same time, we expect our expenses to increase in connection
with our ongoing development activities, particularly as we
continue the research, development, future preclinical studies and
clinical trials of, and seek regulatory approval for, our current
and future drug product candidates. If we are able to list our
common stock on Nasdaq or another national stock exchange, we
expect to incur additional costs associated with operating as a
stock trading public company. In addition, if we
obtain regulatory approval of any of our current or future drug
product candidates, we will need substantial additional funding for
commercialization requirements and our continuing drug product
development operations.
As a
company, we have not completed development through marketing
approvals of any therapeutic products. We expect to continue to
incur significant increases in expenses and increasing operating
losses for the foreseeable future. We anticipate that our expenses
will increase substantially as we:
●
advance the
clinical development and execute the regulatory strategy for
Validive;
●
continue the
clinical development of camsirubicin;
●
continue the
preclinical and potentially enter clinical development of
MNPR-101;
●
acquire and/or
license additional pipeline drug product candidates and pursue the
future preclinical and/or clinical development of such drug product
candidates;
●
seek regulatory
approvals for any of our current and future drug product candidates
that successfully complete registration clinical
trials;
●
establish or
purchase the services of a sales, marketing and distribution
infrastructure to commercialize any products for which we may
obtain marketing approval;
●
develop our
manufacturing capabilities or establish a reliable, high quality
supply chain sufficient to support our clinical requirements and to
provide sufficient capacity to launch and grow the sales of any
product for which we obtain marketing approval; and
●
add or contract for
required operational, financial and management information systems
and capabilities and other specialized expert personnel to support
our drug product candidate development and planned
commercialization efforts.
We
anticipate that the funds raised to-date will fund our minimal
operations through at least December 2020. We have
based this estimate on assumptions that may prove to be wrong, and
we could use our available capital resources sooner than we
currently expect. Because of the numerous risks and uncertainties
associated with the development and commercialization of our drug
product candidates, and the extent to which we enter into
collaborations with third parties to participate in the development
and commercialization of our drug product candidates, we are unable
to accurately estimate with high reliability the amounts and timing
required for increased capital outlays and operating expenditures
associated with our current and anticipated drug product candidate
development programs. Our future capital requirements will depend
on many factors, including:
●
the progress of
regulatory interactions and clinical development of
Validive;
●
the progress of
clinical development and regulatory outcomes of camsirubicin;
●
the progress of
preclinical and clinical development of MNPR-101;
●
the number and
characteristics of other drug product candidates that we may
license, acquire or otherwise pursue;
●
the scope,
progress, timing, cost and results of research, preclinical
development and clinical trials of current and future drug product
candidates;
●
the costs, timing
and outcomes of seeking and obtaining FDA and international
regulatory approvals;
●
the costs
associated with manufacturing/quality requirements and establishing
sales, marketing and distribution capabilities;
●
our ability to
maintain, expand and defend the scope of our intellectual property
portfolio, including the amount and timing of any payments we may
be required to make in connection with the licensing, filing,
defense and enforcement of any patents or other intellectual
property rights;
●
our need and
ability to hire or contract for additional management,
administrative, scientific, medical sales and marketing, and
manufacturing/quality and other specialized personnel or external
expertise;
●
the effect of
competing products or new therapies that may limit market
penetration or prevent the introduction of our drug product
candidates or reduce the commercial potential of our product
portfolio;
●
our need to
implement additional internal systems and infrastructure;
and
●
the economic and
other terms, timing and success of our existing collaboration and
licensing arrangements and any collaboration, licensing or other
arrangements into which we may enter in the future, including the
timing of receipt of or payment to or from others of any milestone
or royalty payments under these arrangements.
See
“Risk Factors”. Expenditures are expected to increase
in the fourth quarter of 2019 and into 2020 onward for
CRO and clinical site fees for the Validive Phase 3 clinical trial,
process development and manufacturing costs of camsirubicin in
preparation for the GEIS Phase 2 clinical trial, collaboration
milestone fees, employee compensation and consulting fees as a
result of hiring additional employees and consultants to support
the planning and initiation of our Validive Phase 3 clinical
development program and in adjusting employee compensation to align
with comparable public companies. There can be no assurance that
any such events will occur. We intend to continue evaluating drug
product candidates for the purpose of growing our pipeline.
Identifying and securing high quality compounds usually takes time
and related expenses; however, our spending could be significantly
accelerated in the fourth quarter of 2019 and into
2020 onward if additional drug product candidates are
acquired and enter clinical development. In this event, we may be
required to expand our management team, and pay much higher
insurance costs, contract manufacturing costs,
contract research organization fees or other clinical development
costs that are not currently projected. We, under this scenario,
plan to pursue raising additional capital over the next 12 –
18 months. The anticipated operating cost increases in
the fourth quarter of 2019 and into 2020 onward are
expected to be primarily driven by the funding of our planned
Validive Phase 3 clinical development program.
Until
we can generate a sufficient amount of product revenue to finance
our cash requirements, we expect to finance our future cash needs
primarily through a combination of equity offerings, debt
financings, strategic collaborations and grant funding. To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, the ownership interest of our
current stockholders will be diluted, and the terms of these
securities may include liquidation or other preferences that
adversely affect our stockholders’ rights. See “Risk
Factors – Existing and new investors will experience dilution
as a result of our option plan and potential future stock
sales.” 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 marketing and distribution arrangements or other
collaborations, strategic alliances or licensing arrangements with
other parties, we may have to relinquish valuable rights to our
technologies, future revenue streams, research programs or drug
product candidates or grant licenses on terms that may not be
favorable to us, will reduce our future returns and affect our
future operating flexibility. If we are unable to raise additional
funds through equity or debt financings when needed, we may be
required to delay, limit, reduce or terminate our pipeline product
development or commercialization efforts or grant rights to others
to develop and market drug product candidates that we would
otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
Development and Collaboration Agreements
Onxeo S.A.
In June
2016, we executed an agreement with Onxeo S.A., a French public
company, which gave us the exclusive option to license (on a
world-wide exclusive basis) Validive (clonidine mucobuccal tablet;
clonidine MBT a mucoadhesive tablet of clonidine based on the
Lauriad mucoadhesive technology) to pursue treating severe oral
mucositis in patients undergoing chemoradiation treatment for head
and neck cancers. The agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if we achieve all milestones, and escalating royalties from
5% to 10% on net sales. In September 2017, we exercised the option
to license Validive from Onxeo for $1 million, but as of
November 4,
2019, we have not been required to pay Onxeo any other funds under
the agreement. We anticipate the need to raise significant funds to
support the completion of clinical development and marketing
approval of Validive.
Under
the agreement, we are required to pay royalties to Onxeo on a
product-by-product and country-by-country basis until the later of
(1) the date when a given product is no longer within the scope of
a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever our royalty payment obligations with respect
to such product have expired. The agreement may also be terminated
early for cause if either we or Onxeo materially breach the
agreement, or if either we or Onxeo become insolvent. We may also
choose to terminate the agreement, either in its entirety or as to
a certain product and a certain country, by providing Onxeo with
advance notice.
Grupo Español de Investigación en Sarcomas
(“GEIS”)
In June
2019, we executed a clinical collaboration with GEIS for the
development of camsirubicin in patients with advanced soft tissue
sarcoma (“ASTS”). GEIS will be the study sponsor and
will lead a multi-country, randomized, open-label Phase 2 clinical
trial to evaluate camsirubicin head-to-head against the
current 1st line treatment for ASTS,
doxorubicin. Enrollment of the trial is currently expected
to begin in the first quarter of 2020, and to include
approximately 170 ASTS patients. We will provide study drug and
supplemental financial support for the clinical trial averaging
approximately $1 million to $2 million per year. As of November
4, 2019, we provided a nominal amount
of financial support. We can terminate the
agreement by providing GEIS with advance notice, and without affecting our
rights and ownership to any intellectual property or clinical
data.
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma, LLC to
us included the non-exclusive license agreement with XOMA Ltd. For
the humanization technology used in the development of MNPR-101.
Pursuant to such license agreement, we are obligated to pay XOMA
Ltd. Clinical, regulatory and sales milestones which could reach up
to $14.925 million if we achieve all milestones for MNPR-101 The
agreement does not require the payment of sales royalties. There
can be no assurance that we will achieve any milestones. As of
November 4, 2019, we had not reached any milestones
and had not been required to pay XOMA Ltd. Any funds under this
license agreement.
Service Providers
In the
normal course of business, we contract with service providers to
assist in the performance of research and development, financial
strategy, audit, tax and legal support. We can elect to discontinue
the work under these agreements at any time. We could also enter
into collaborative research, contract research, manufacturing and
supplier agreements in the future, which may require upfront
payments and/or long-term commitments of cash.
Office Lease
Effective January
1, 2018, we leased office space in the Village of Wilmette,
Illinois for $2,519.50 per month for 24 months. This office space
houses our current headquarters. In February 2019, we leased
additional office spaces on a month-to-month basis at our
headquarters and we anticipate that we will lease additional space
in the future as we hire additional personnel.
Legal Contingencies
We
are currently not, and to date have never been, a party to any
material legal proceedings.
Indemnification
In
the normal course of business, we enter into contracts and
agreements that contain a variety of representations and warranties
and provide for general indemnification. Our exposure under these
agreements is unknown because it involves claims that may be made
against us in the future, but that have not yet been made. To date,
we have not paid any claims or been required to defend any action
related to our indemnification obligations. However, we may record
charges in the future as a result of these indemnification
obligations.
In
accordance with our Second Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws we have
indemnification obligations to our officers and Board Members for
certain events or occurrences, subject to certain limits, while
they are serving at our request in such capacity. There have been
no claims to date. See “Risk Factors – We have limited the liability of and indemnified
our directors and officers.”
Off-Balance Sheet Arrangements
To
date, we have not had any off-balance sheet arrangements, as
defined under the SEC rules.
Overview
We are
a clinical stage biopharmaceutical company focused on developing
proprietary therapeutics designed to improve clinical outcomes for
cancer patients. We are building a drug development pipeline
through the licensing and acquisition of oncology therapeutics in
late preclinical and clinical development stages. We leverage our
scientific and clinical experience to help de-risk and accelerate
the clinical development of our drug product
candidates.
We
intend to begin a Phase 3 clinical development program for our lead
product candidate, Validive (clonidine mucobuccal tablet; clonidine
MBT), in the first quarter of 2020.
Validive is designed to be used prophylactically to reduce the
incidence, delay the time to onset, and decrease the duration of
severe oral mucositis (“SOM”) in patients undergoing
chemoradiotherapy (“CRT”) for oropharyngeal cancer
(“OPC”). SOM is a painful and debilitating inflammation
and ulceration of the mucous membranes lining the oral cavity and
oropharynx in response to chemoradiation. The majority of patients
receiving CRT to treat their OPC develop SOM, which remains one of
the most common and devastating side effects of treatment in this
indication. The potential clinical benefits to patients of reducing
or delaying the incidence of SOM, or reducing the duration of SOM,
include: reduced treatment discontinuations leading to potentially
improved overall survival outcomes; reduced mouth and throat pain
avoiding the need to receive parenteral nutrition; and decreased
long-term and often permanent debilitation arising from swallowing
difficulties, neck and throat spasms, and lung complications due to
food aspiration. Our mucobuccal tablet (“MBT”)
formulation is a novel delivery system for clonidine that allows
for prolonged and enhanced local delivery of drug in the regions of
mucosal radiation damage in patients with OPC. Validive has been
granted fast track designation in the U.S., orphan drug designation
in the EU, and has global intellectual property patent protection
through mid-2029 not accounting for possible
extensions.
In
September 2017, we exercised an option to license Validive from
Onxeo S.A., the company that developed Validive through its Phase 2
clinical trial. In the completed Phase 2 clinical trial, Validive
demonstrated clinically meaningful efficacy signals within the
64-patient OPC population randomized to placebo, Validive 50
µg dose and Validive 100 µg dose. The absolute incidence
of SOM in OPC patients who received a dose of Validive 100 µg
once per day was reduced by 26.3% (incidence rate of 65.2% in
placebo, 45.0% in Validive 50 µg group, and 38.9% in Validive
100 µg group). The median time to onset of SOM was 37 days in
the placebo cohort, 45 days in the Validive 50 µg cohort and
no median time of onset was reached in the Validive 100 µg
group since fewer than half of this cohort of patients developed
SOM. There was also a 37.8% reduction in the median duration of the
SOM for the Validive 100 µg group versus placebo (41.0 days
placebo group, 34.0 days Validive 50 µg group, and 25.5 days
Validive 100 µg group) in patients that developed SOM. Median
duration of SOM across all patients, inclusive of both those that
did and did not develop SOM, was 17 days in the placebo group and 0
days in each of the Validive 50 and 100 µg groups. A positive
dose response was seen in each of these three clinical endpoints.
Additionally, patients in the Validive cohorts in the Phase 2
clinical trial demonstrated a safety profile similar to that of
placebo. While not designed by us, Onxeo’s promising
preclinical studies and Phase 2 clinical trial have informed the
design and conduct of what we believe will be an effective Phase 3
clinical program.
SOM
typically arises in the immune tissue at the back of the tongue and
throat, which comprise the oropharynx, and consists of acute severe
tissue damage and pain that prevents patients from swallowing,
eating and drinking. Validive stimulates the alpha-2 adrenergic
receptor on macrophages (white blood cells present in the immune
tissues of the oropharynx) suppressing pro-inflammatory cytokine
expression. Validive exerts its effects locally in the mouth over a
prolonged period of time through its unique MBT formulation.
Patients who develop SOM are also at increased risk of developing
late onset toxicities, including trismus (jaw, neck, and throat
spasms), dysphagia, and lung complications, which are often
irreversible and lead to increased hospitalization and the need for
further interventions sometimes years after completion of
chemoradiotherapy. We believe that a reduction in the incidence and
duration of SOM by Validive will have the potential to reduce
treatment discontinuation and/or treatment delays potentially
leading to improved survival outcomes, and reducing or eliminating
these long-term morbidities.
The OPC
target population for Validive is the most rapidly growing segment
of head and neck cancer (“HNC”) patients, with an
estimated 40,000 new cases of OPC in the U.S alone in 2019.
The growth in OPC is
driven by the increasing prevalence of oral human papilloma
virus (“HPV”) infections in the U.S. and around the
world. Despite the availability of a pediatric/adolescent HPV
vaccine, the rate of OPC incidence in adults is not anticipated to
be materially reduced for many decades due to low adoption of the vaccine
to date. As a result, the incidence of HPV-driven OPC is
projected to increase for many years to come and will continue to
support a clinical need for Validive for the prevention of
CRT-induced SOM in patients with OPC since CRT is the standard of
care treatment.
A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) was submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from the
European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP). Based on comments and guidance provided by FDA and
EMA, we intend to initiate a Phase 3 clinical development program
in the first quarter of 2020 to support
registration. This program will consist of an adaptive design trial
with an interim analysis planned for approximately twelve months
after the first patient is dosed, and a confirmatory second trial
planned to commence shortly after completion of this interim
analysis.
Our
second product candidate, camsirubicin, is a novel analog of
doxorubicin which has been designed to reduce the cardiotoxic side
effects generated by doxorubicin while retaining anti-cancer
activity. Camsirubicin is not metabolized to the derivatives that
are believed to be responsible for doxorubicin’s cardiotoxic
effects. A Phase 2 clinical trial for camsirubicin has been
completed in patients with advanced (e.g. unresectable or
metastatic) soft tissue sarcoma (“ASTS”). Average life
expectancy for these patients is currently only 12-15 months. In
this study, 52.6% of patients
evaluable for tumor progression demonstrated clinical
benefit (partial response or stable disease), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2). Camsirubicin was
very well tolerated in this study and underscored the ability to
potentially administer camsirubicin without restriction for
cumulative dose in patients with ASTS. Doxorubicin is limited to a
lifetime cumulative dose maximum of 450 mg/m2, to minimize
irreversible heart damage. Even if a patient is responding, they
are pulled off doxorubicin treatment once this cumulative dose has
been reached.
Based
on encouraging clinical results to date, we plan to continue the
development of camsirubicin as first line treatment in patients
with ASTS, where the current first line treatment is doxorubicin.
The aim is to administer camsirubicin without restricting
cumulative dose, thereby potentially improving efficacy by keeping
patients on treatment who are responding. In June 2019, we entered
into a clinical collaboration with Grupo Español de
Investigación en Sarcomas (“GEIS”). GEIS will lead
a multi-country, randomized, open-label Phase 2 clinical trial
evaluating camsirubicin head-to-head against doxorubicin as first
line therapy in patients with ASTS. GEIS is an internationally
renowned non-profit organization focused on the research,
development and management of clinical trials for sarcoma, that has
worked with many of the leading biotech and global pharmaceutical
companies. Enrollment of the trial is currently expected to begin
in the first quarter of 2020, and to include
approximately 170 ASTS patients, an interim analysis, and take
around 2 years to enroll. The primary endpoint of the trial will be
progression-free survival, with secondary endpoints including
overall survival and incidence of treatment-emergent adverse
events.
Our
third program, MNPR-101, is a novel first-in-class humanized
monoclonal antibody to the urokinase plasminogen activator receptor
(“uPAR”) for the treatment of advanced cancers. The
IND-enabling work is nearly completed.
Our
management team has extensive experience in developing therapeutics
through regulatory approval and commercialization. In aggregate,
companies they co-founded have achieved four drug approvals in the
U.S. and the EU, successfully sold an asset developed by management
which is currently in Phase 3 clinical trials, and completed the
sale of a biopharmaceutical company for over $800 million in cash.
Understanding the preclinical, clinical, regulatory and commercial
development processes and hurdles are key factors in successful
drug development and the expertise demonstrated by our management
team across all of these areas increases the probability of success
in advancing the product candidates in our product
pipeline.
Our Product Pipeline
Our
Strategy
Leveraging the
experience and the demonstrated competencies of our management
team, our strategic goal is to acquire, develop and commercialize
promising oncology product candidates that address the unmet
medical needs of cancer patients. The key elements of our strategy
to achieve this goal are to:
●
Leverage data generated from the Phase 2
Validive clinical trial to position us well for a successful Phase
3 clinical program for Validive for SOM in OPC. In a Phase 2
clinical trial the absolute incidence of SOM in OPC patients was
reduced by 26.3%, the time to onset was delayed, and the duration
in patients that developed SOM was decreased by 15.5 days in the
Validive 100 µg cohort versus placebo. In addition to the data
from the Phase 2 clinical trial, we believe the guidance from our
key opinion leaders (“KOLs”) as well as from the FDA
and EMA, and our own internal clinical trial design expertise,
position us well for a successful Phase 3 clinical trial
program.
●
Obtain FDA approval of Validive and maximize
the commercial potential of Validive in the U.S. and the EU,
seeking partnerships outside these markets. Following a
potentially successful Phase 3 clinical program of Validive and
potential FDA approval, we intend to commercialize Validive in the
U.S. and the EU which may include establishing our own specialty
sales force and seeking partnerships outside of these territories
for regulatory approval and drug sales and
distribution.
●
Advance the clinical
development of camsirubicin, by pursuing existing clinical
indications where doxorubicin has demonstrated efficacy.
ASTS will be the first indication, which will allow camsirubicin to
go head to head against doxorubicin, the current 1st line treatment. In
this indication, camsirubicin previously demonstrated clinical
benefit (stable disease or
partial response) in 52.6% of patients evaluable for
tumor progression in a single arm Phase 2 study. Clinical
benefit was proportional to dose and consistently observed at
higher cumulative doses of camsirubicin (>1000 mg/m2). Camsirubicin was
very well tolerated in this Phase 2 study and underscored the
ability to potentially administer camsirubicin without restriction
for cumulative dose (doxorubicin is limited to 450 mg/m2 cumulative dose due
to heart toxicity).
●
Continue the development of MNPR-101 and expand
our drug development pipeline through in-license and acquisition of
oncology product candidates. We plan to continue the
development of MNPR-101 and the expansion of our drug development
pipeline through acquiring or in-licensing additional oncology
product candidates, particularly those that leverage existing
scientific and clinical data that helps de-risk the next steps in
clinical development.
●
Utilize the expertise and prior experience of
our team in the areas of asset acquisition, drug development and
commercialization to establish ourselves as a leading
biopharmaceutical company. Our senior executive team has
relevant experience in biopharmaceutical in-licensing and
acquisitions as well as developing product candidates through
approval and commercialization. In aggregate, our team has
co-founded BioMarin Pharmaceutical (Nasdaq: BMRN), Raptor
Pharmaceuticals ($800 million sale to Horizon Pharma), and Tactic
Pharma, LLC (“Tactic Pharma”) (sale of lead asset,
choline tetrathiomolybdate, which was ultimately acquired by
Alexion in June 2018 for $764 million).
Our Product Candidates
Validive (clonidine mucobuccal tablet; clonidine MBT)
Validive
is an MBT of clonidine. The MBT formulation was developed to
enhance the oral mucosal drug delivery and significantly increase
the salivary concentrations of the active ingredient while
minimizing systemic absorption. The Validive tablet is tasteless
and administered once daily by affixing it to the outside of the
patient’s upper gum where it dissolves slowly over the period
of several hours, resulting in the extended release of clonidine
into the oral cavity and oropharynx, the site of SOM following
chemoradiation treatment for OPC. Validive therapy is designed to
begin on the first day of chemoradiation treatment and continue
daily through the last day of treatment.
SOM is
a painful and debilitating inflammation and ulceration of the
mucous membranes lining the oral cavity and oropharynx. Patients
receiving CRT to treat their OPC often develop SOM, which remains
one of the most common and troubling side effects of treatment in
this indication. We believe Validive has the potential to address
several critical elements that affect SOM patients,
including:
●
Reduction in the incidence of
SOM. SOM can
increase the risk of acute and chronic comorbidities, including
dysphagia, trismus and lung complications, which are often
irreversible and lead to increased hospitalization and the need for
additional interventions. In a Phase 2 clinical trial, the OPC
patient cohort treated with Validive 100 µg demonstrated a
reduction in the absolute incidence of SOM compared to placebo of
26.3% (incidence rate of 65.2% in placebo, 45.0% in Validive 50
µg group, 38.9% in Validive 100 µg group). A reduced
incidence of SOM in OPC patients may lower the risk of acute and
chronic morbidities and improve quality of life.
●
Delay in the time to onset of SOM. SOM
can cause cancer treatment delay and/or discontinuation, which may
impact overall survival outcomes. In a Phase 2 clinical trial, the
OPC patients had a time to onset of SOM of 37 days in the placebo
cohort; 45-day time to onset of SOM in the Validive 50 µg
cohort; and median was not reached as fewer than half of the
patients developed SOM in the Validive 100 µg group.
Prolonging time to onset of SOM may lead to fewer missed
chemoradiotherapy treatments, resulting in improved overall
survival outcomes.
●
Decrease in the duration of
SOM. Longer duration of
SOM leads to a higher risk of the need for parenteral nutrition and
lower quality of life. SOM patients experience inability to drink
and/or eat, and difficulty swallowing often resulting in
malnourishment and feeding tube intervention. The Phase 2 clinical
trial data demonstrated a 15.5-day reduction (by 37.8%) in the
duration of SOM for patients treated with Validive 100 µg (41
day median duration with placebo, 34 days with the Validive 50
µg group, and 25.5 days for the Validive 100 µg group) in
patients that developed SOM. Median duration across all patients,
inclusive of both those that did and did not develop SOM, was 17
days in the placebo group and 0 days in each of the Validive 50 and
100 µg groups. Reduced duration of SOM may result in lower
risk of malnourishment and feeding tube intervention, and fewer
treatment terminations/delays.
Validive U.S. Market Opportunity
The
incidence of HNC (all anatomical types, including larynx, oral
cavity, oropharynx, etc.) in the U.S. was estimated to be
approximately 65,000 cases in 2017 (American Society of Clinical
Oncology, cancer.net). The most rapidly growing type of HNC is OPC.
The oropharynx is comprised largely of immune tissue and includes
the soft palate, the base (rear one third) of the tongue, and the
tonsils. In the U.S., the incidence of OPC is estimated to be
around 40,000 cases in 2019. The majority of these OPC patients
(approximately 70%) are HPV+. The incidence of OPC is also
increasing in the rest of the world (>30% of HNC), with >50%
of all OPC being HPV+. While certain types of HNC have been in
decline in the U.S., such as laryngeal cancer as a result of a
reduction in the smoking population, the total incidence of HNC has
been growing steadily primarily due to OPC. The increase in OPC is
directly associated with increased infection with the human
papilloma virus. The incidence of HPV+ OPC has outpaced the
incidence of HPV– HNC by 4-5-fold over the past decade. This
trend of HPV+ OPC driving an increase in overall HNC is expected to
continue for some time as the relatively recent introduction of a
vaccine designed to prevent the transfer and colonization with HPV
is only effective if administered prior to infection, and it is
recommended only for those under the age of 26. Even for those
under the age of 26 who are eligible for the vaccine, oral HPV
infections are predicted to increase due to the lack of adequate
use of HPV vaccinations. Approximately 50% of eligible females and
33% of eligible males are presently being vaccinated.
Most
OPC is caused by the HPV16 strain, with virus detectable in the
tumor. More than 3% of adult men and 1% of adult woman have HPV16
detectable in their saliva at any one time. The virus is
transmitted through sexual contact and studies estimate 3-5% of
adolescents and 5-10% of all adults in the U.S. have an active oral
HPV infection. The latency period for that proportion that does go
on to develop HPV+ OPC is 15-20+ years. This HPV+ OPC population is
expected to be a long-term driver of the incidence of OPC and the
resultant SOM associated with what is frequently curative therapy
for this serious malignancy.
In
previous studies describing SOM in OPC patients receiving the CRT
regimen we are proposing for our Validive Phase 3 clinical program,
patients had a SOM incidence rate of 55%-90% across studies. In the
Validive Phase 2 trial, the incidence of SOM in OPC patients
receiving placebo was 65.2% (see “Validive Phase 2 Clinical Trial
Data” section below). Currently there is no way to
predict which patients will develop SOM, so any preventive
treatment for SOM will likely be used in most OPC patients
receiving CRT. With approximately 40,000 annual cases of OPC in the
U.S., and a consistently growing incidence of OPC as a result of
the human papillomavirus, there is the potential for a substantial
and growing market for Validive.
Validive Mechanism of Action
Validive is
designed to deliver high local concentrations of clonidine, an
agonist of alpha-2AR, to the oral cavity and oropharynx, the site
of irradiation in the treatment of OPC. In the oropharynx,
alpha-2AR is expressed on macrophages, immune cells that produce
inflammatory cytokines, the molecules that are responsible for the
development of SOM, in response to chemoradiation. A recent
clinical study demonstrated that chemoradiation treatment
substantially increased salivary cytokine levels and that these
were positively associated with the formation of SOM in patients
with head and neck cancer. Patients with human papilloma virus
positive (“HPV+”) OPC demonstrate an increased
accumulation of macrophages in the tumor microenvironment compared
to patients with OPC that were negative for human papilloma virus
(“HPV–”), thus further priming HPV+ OPC patients
for the development of SOM. The alpha-2AR regulates the expression
of cytokines by macrophages, and clonidine reduces this cytokine
production. Macrophages are the primary immune cells in the
oropharynx that express alpha-2AR, making clonidine’s
mechanism of cytokine suppression macrophage selective and distinct
from the mechanism of other anti-inflammatory drugs. Further,
Validive delivers clonidine to the mucosal surface, the site of
chemoradiation treatment in OPC. This results in high salivary
concentrations of clonidine, minimizing systemic absorption, and
allowing for maximal exposure of drug to the at-risk oral mucosa
and the OPC microenvironment. Preclinical studies and a Phase 2
clinical trial of Validive have provided data that support
Validive’s mechanism of action and therapeutic potential for
reducing the development of SOM in patients with OPC, improving
oral mucositis-related symptoms, and decreasing
chemoradiotherapy-related adverse events, while exhibiting a
favorable safety profile and high compliance rate in
patients.
Validive Development Strategy
A pre-Phase 3 meeting with
the FDA was held and based on the meeting discussion, a Phase 3
clinical protocol and accompanying statistical analysis plan
(“SAP”) were submitted to the FDA for review and
comments. We have also received protocol assistance and advice on
our Phase 3 protocol and SAP from the European Medicines Agency
Committee on Human Medicinal Products (EMA/CHMP/SAWP) in June 2018.
Based on comments and guidance provided by the FDA and EMA, we
intend to initiate a Phase 3 clinical development program of
Validive in OPC patients in the first quarter of
2020 to support registration. This program will
consist of an adaptive design trial with an interim analysis
planned after a
predetermined number of patients are enrolled (estimated to
occur approximately twelve months after the first patient is
dosed), and a confirmatory second trial planned to commence shortly
after completion of this interim analysis. The program is powered based on the Phase
2 data in OPC
patients. Each trial will be randomized, double-blinded,
placebo-controlled, with a two-sided alpha of 0.05
(p<0.05(1)). The dose for
both trials will be Validive 100 µg, once daily. The primary
endpoint will be the proportion of subjects that develop SOM (World
Health Organization grade ≥ 3). Secondary endpoints are currently planned to
include the total number of days of SOM per patient (i.e. duration)
and risk of onset of SOM (which is based on time to onset).
Enrollment for the first trial is anticipated to be around 250
patients and to take approximately a year-and-a-half to two years.
Patients will be stratified based on HPV status. At the interim,
the drug monitoring committee for the trial will recommend
continued accrual in all OPC patients, enrichment for HPV+ OPC
patients only, or to stop the trial if a pre-defined futility
threshold is not met. The second trial is currently planned to be
smaller (approximately 200 patients) and to include either all
OPCpatients or only HPV+ OPC patients, depending on the interim
results of the first trial. Given the fact that Validive has Fast
Track designation from the FDA, if the data in the first trial is
sufficiently positive, it could be possible to start a rolling NDA
submission after completion of the first trial. Additionally, since
several formulations of clonidine are already approved in the US,
Validive may be eligible for FDA’s 505(b)2 pathway using
clonidine as the reference drug.
(1)
p-value is a conventional statistical method for measuring
the statistical significance of experimental results. A p-value of
less than 0.05 is generally considered to represent statistical
significance, meaning that there is a less than five percent
likelihood that the observed results occurred by
chance.
Validive Phase 2 Clinical Trial Data
In
October 2015, the results from an international Phase 2 clinical
trial of Validive were announced, demonstrating promising signs of
clinical activity and safety compared to placebo. The trial
enrolled 183 patients and was conducted in more than thirty centers
in Europe and the United States. HNC patients who had undergone
surgical resection of their head and neck cancer with curative
intent and who were planned to receive at least 50 Gray (Gy) of
radiation in combination with chemotherapy, regardless of
anatomical location of disease, were included in this study. This
global, multi-center, double-blind, randomized, placebo-controlled,
three-arm study (NCT01385748) compared the efficacy and safety of
Validive 50 µg and 100 µg to placebo in patients with HNC
receiving chemoradiotherapy. Of the 183 HNC patients, 64 had OPC
(placebo = 24, Validive 50 µg = 21, Validive 100 µg =
19). Validive and placebo were administered once daily beginning 1
to 3 days prior to chemoradiotherapy and continuing until the end
of chemoradiation.
We
believe the Phase 2 clinical trial data support the development of
Validive for reducing the incidence, delaying the time to onset,
and reducing the duration of SOM in OPC patients. We believe there
is the potential for an enhanced benefit in HPV+ patients. These
patients have an increased prevalence of macrophages in the
oropharynx, and a 6.9-fold higher risk of developing SOM. The onset
of SOM also occurs sooner in HPV+ patients than in HPV– OPC
patients, likely due to the increased accumulation of immune cells
such as macrophages in the tumor due to the presence of the HPV
infection. These cells express oral mucosa damaging cytokines in
response to chemoradiation, and Validive exerts its effect by
suppressing this expression.
The
analysis of OPC patients in this study showed:
●
The incidence of
SOM (primary endpoint) was reduced by 26.3% (40% relative to
placebo) in OPC patients treated with Validive 100 µg
(p=0.09), a meaningful trend but not statistically significant).
65.2% of OPC patients on placebo experienced SOM compared to only
38.9% of OPC patients on Validive 100 µg.
●
Patients on
Validive experienced a delay in the time to onset of SOM. Patients
receiving placebo experienced a median time to onset of SOM of 37
days; patients receiving Validive (50 µg one per day)
experienced a 45 day median time to onset of SOM; and patients
receiving Validive (100 µg once per day) did not reach a
median time to onset. A comparison of hazards for time to onset
demonstrated that patients that received Validive 100 µg had a
hazard ratio (HR)=0.48 compared to placebo.
●
Patients receiving
Validive experienced a decrease in the median duration of SOM. In
patients that developed SOM, a 15.5 day reduction (by 37.8%) in the
median duration of SOM was observed in patients treated with
Validive 100 µg (41 day median duration with placebo, 34 days
in the Validive 50 µg group, and 25.5 days in the Validive 100
µg group). Median duration across all patients, inclusive of
both those that did and did not develop SOM, was 17 days in the
placebo group and 0 days in each of the Validive 50 and 100 µg
groups.
●
Severe drinking,
eating, and speaking limitations due to mouth and throat soreness
(“MTS”) score were also reduced in the Validive 100
µg treated cohort.
●
Improvements in
other indicators of clinical benefit, including decreased weight
loss, decreased opiate use and increased cumulative dose of
radiation received, strongly favored the Validive 100 µg
treated group.
●
A dose response was
observed with the Validive 100 µg dose, demonstrating a trend
toward superiority over the Validive 50 µg dose as well as
placebo. Individual patient-level data supports advancing the
Validive 100 µg dose into Phase 3.
Individual Patient Data Showing Incidence, Time to Onset, and
Duration of SOM in OPC patients Treated with Placebo and Two
Different Doses of Validive (50 and 100 µg/day)
For the
full 183-patient Phase 2 population, which included various types
of head and neck cancer such as oral and laryngeal cancer in
addition to OPC, the incidence of SOM was lower in patients treated
with Validive (45.3% when the 50 and 100 µg dose groups were
pooled together) than in patients receiving placebo (60.0%) (p =
0.064). Additionally, Validive was very well tolerated, with the
occurrence of adverse events of any type or grade being similar
between placebo and Validive treated groups. Patients treated with
Validive experienced less nausea and dysphagia compared to placebo.
No clinically meaningful decreases in systolic blood pressure or
diastolic blood pressure were noted between the placebo and
Validive arms. There was no statistical difference in the number of
patients having experienced at least one treatment emergent adverse
event related to the study treatment between placebo and Validive
as summarized in the table below. Two patients in the placebo group
and 2 patients in the Validive 50 µg group experienced a
serious treatment-emergent adverse event (“STEAE”). No
STEAEs were observed in the Validive 100 µg cohort. No
patients in the Validive-treated cohorts were discontinued due to
study drug. The 2-year survival rate was not statistically
different between patients treated with placebo and Validive
indicating that Validive did not interfere with primary disease
treatment.
All
Serious Treatment-emergent Adverse Events Related to Study
Drug
System Organ Class
Preferred Term
|
Placebo
|
Clonidine MBT
(50 µg)
|
Clonidine MBT
(100 µg)
|
n=62
|
n=55
|
n=64
|
All
|
All
|
2
(3.2%)
|
2
(3.6%)
|
0
|
Vascular
Disorders
|
Hypotension
|
0
|
2
(3.6%)
|
0
|
Gastrointestinal
disorders
|
Dysphagia
|
1
(1.6%)
|
0
|
0
|
Metabolism
and nutritional disorders
|
Dehydration
|
1
(1.6%)
|
0
|
0
|
MBT=mucoadhesive buccal tablet; n=number of patients
studied
The
mean overall patient compliance as assessed by the investigators
was approximately 90%, and similar across all treatment groups.
Overall compliance according to patient diaries was also similar in
all treatment groups and consistent with the compliance according
to the investigator’s evaluation. The mean incidence of
swallowing of the MBT was low (4.7%) for all patients based on
7,366 daily MBT applications across all treatment
groups.
Our
review of the Phase 2 clinical trial data suggests that the effect
of Validive was much greater in OPC compared to non-OPC patients.
We believe the Phase 2 data along with the mechanism of action of
Validive provide a rationale for developing Validive for the
treatment of chemoradiation induced SOM in OPC patients as a first
indication. The most rapidly growing sub-population of HNC in the
U.S. and Europe are patients with OPC, largely driven by HPV+
disease. The oropharynx is the part of the throat at the back of
the mouth, which includes the soft palate, the base (rear one
third) of the tongue, and the tonsils. HPV+ OPC is a molecularly
defined population of HNC characterized by the expression of a
protein biomarker, p16 INK4a, and the presence of HPV DNA in the
tumor. Evaluation of HPV status is part of the routine clinical
assessment of patients with OPC prior to initiating
treatment.
Validive Phase 1 Clinical Trial Data
A Phase
1 clinical trial in 36 healthy volunteers comparing the
pharmacokinetics of the systemic (oral tablet) clonidine HCl with
clonidine MBT (local delivery of clonidine to oral mucosa and
oropharynx – Validive’s formulation) was completed.
This was a single-center, Phase 1, single-blind randomized,
three-period, three-sequence, single-dose crossover study was
conducted between August and November 2015. Healthy volunteers
receiving Validive had far less systemic exposure to clonidine with
the 50 µg and 100 µg clonidine MBTs (Validive) versus 100
µg clonidine HCl tablets (swallowed oral tablet). In contrast,
levels of clonidine in saliva in volunteers receiving a single dose
of 50 and 100 µg clonidine MBT (Validive) was much greater
than saliva levels in volunteers receiving a single dose of 100
µg clonidine HCl tablets. Additionally, no significant effects
on blood pressure were observed with the clonidine MBTs (Validive).
Blood pressure effects were tested because clonidine is known to
lower blood pressure when absorbed systemically. These results are
consistent with the expectation that the MBT formulation (Validive)
is targeted to release clonidine in the mouth, as opposed to
distributed systemically.
Both
Validive 50 µg and 100 µg showed high salivary exposure
(as seen above), with low systematic and blood pressure effect (as
seen below):
Validive Preclinical Data
The
anti-inflammatory properties of clonidine were studied in a human
oral mucosa organotypic culture model, as pro-inflammatory
cytokines are believed to drive the development of SOM. Samples of
healthy non-keratinized human oral mucosa were obtained from
patients undergoing surgery. The experimental oral mucosa
pro-inflammatory process was mediated by the addition of
neuropeptide substance P (“SP”) to the culture medium.
The addition of SP on human gingiva induced a significant increase
in TNF-alpha, an important pro-inflammatory molecule involved in
mucositis pathogenesis. Overall, on human gingiva stimulated by SP,
a concentration dependent decrease in TNF-alpha production was
observed with clonidine, which was statistically significant at 3
µg/ml clonidine; see below:
Camsirubicin
(5-imino-13-deoxydoxorubicin; formerly MNPR-201,
GPX-150)
Camsirubicin is a proprietary doxorubicin
analog that is selective for topoisomerase II-alpha. Doxorubicin is
used to treat adult and pediatric solid and blood (hematologic)
cancers, including soft tissue sarcomas, breast, gastric, ovarian
and bladder cancers, leukemias and lymphomas. The clinical efficacy
of doxorubicin has historically been limited by the risk of
patients developing irreversible, potentially life-threatening
cardiotoxicity despite clinical studies demonstrating the
anti-cancer benefit of higher doses of doxorubicin administered for
longer periods of time. For example, several clinical studies
completed in the 1990s demonstrated that concurrent doxorubicin (60
mg/m2, 8
cycles) and paclitaxel gave a 94% overall response rate in patients
with metastatic breast cancer but led to 18% of these patients
developing congestive heart failure. Reduction of doxorubicin to
4-6 cycles of treatment decreased the incidence of congestive heart
failure, but also reduced response rates to 45-55%.
Camsirubicin has
been engineered specifically to retain the anticancer activity of
doxorubicin while minimizing the toxic effects on the heart.
Similar to doxorubicin, the antitumor effects of camsirubicin are
mediated through the stabilization of the topoisomerase II complex
after a DNA strand break and DNA intercalation leading to tumor
cell apoptosis (cell death). Inhibiting the topoisomerase II-alpha
isoform is desired for the anti-cancer effect, while inhibiting the
topoisomerase II-beta isoform has been demonstrated to mediate, at
least in part, the cardiotoxicity associated with all anthracycline
drugs currently used in the clinic. Camsirubicin is substantially
more selective than doxorubicin for inhibiting topoisomerase
II-alpha versus topoisomerase II-beta. This selectivity may at
least partly explain the minimal cardiotoxicity that has been
observed for camsirubicin in preclinical and clinical studies to
date. We believe that these attributes provide a strong rationale
to develop camsirubicin as a monotherapy as well as in combination
with other anticancer agents, without potential restrictions on
cumulative dose, and offer the opportunity to pursue a large market
opportunity for camsirubucin in a broad spectrum of cancer
types.
Development of
camsirubicin is being pursued initially in patients with advanced
soft tissue sarcoma (ASTS). Currently, these patients receive
doxorubicin in the 1st line, so
camsirubicin will be evaluated in a randomized phase 2 trial head
to head against doxorubicin. Although doxorubicin has been the
standard of care treatment for ASTS for over 40 years, even if
patients are experiencing clinical benefit, they are pulled off
treatment once their cumulative dose reaches the lifetime maximum
of 450 mg/m2. In a clinical study
looking at dose response, sarcoma patients on the high
dose (75 mg/m2) doxorubicin had a
response rate of 37% compared to just 18% in the low dose (45
mg/m2)
doxorubicin group. With the cumulative dose restriction on
doxorubicin, the median progression free survival for ASTS patients
is approximately 6 months, with median overall survival of 12-15
months. There is a significant unmet opportunity to develop a
replacement for doxorubicin that can be dosed higher and for
longer.
Camsirubicin U.S. Market
Opportunity
Camsirubicin is an analog of doxorubicin,
the first anthracycline to gain FDA approval. Anthracyclines are a
class of drugs that are among the most commonly used agents in the
treatment of cancer. They have demonstrated efficacy in a wide
variety of cancers, including soft tissue sarcoma, breast cancer,
lung cancer, ovarian cancer, and lymphomas. Although doxorubicin
was approved decades ago, it is still widely used. According to
Grand View Research, in 2015 the global doxorubicin market was
$809.6 million, with $349.7 million of those sales in the U.S.
According to IMS Health (now known as IQVIA), in 2015 the European
Union had over $270 million in sales between doxorubicin HCl and
liposomal doxorubicin. Liposomal versions of doxorubicin (e.g.
Doxil®) demonstrated
that a different formulation of doxorubicin with improved clinical
benefits can command a significantly higher price premium compared
to generic doxorubicin HCl.
The
market opportunity for the first indication, ASTS, is anticipated
to be quite significant. In 2018, there were an estimated 13,040
new cases of soft tissue sarcoma (STS) in the US, and approximately
5,150 deaths from STS, mainly from metastatic disease.
Additionally, a few years ago a PDGFR-targeted antibody
(olaratumab) was granted accelerated approval based on data from an
open label Phase 2 trial. Earlier this year, the olaratumab Phase 3
trial came back negative, resulting in the drug being pulled from
the market. Olaratumab had just completed its second full year on
the market in the US and abroad before being pulled, reaching over
$304M in 2018 annual sales, demonstrating the large unmet medical
need and market opportunity in ASTS.
Camsirubicin Development
Strategy
The
objective is to achieve superior efficacy to doxorubicin by using a
novel doxorubicin analog, camsirubicin, with little to no
restriction on cumulative dose, to allow dosing to go higher and
longer. We plan to initiate a randomized, open label Phase 2 trial
that will compare camsirubicin
to doxorubicin in patients with advanced soft tissue sarcoma
(ASTS). These are patients who are not amenable to surgery or
radiation treatment, and are largely made up of patients with
metastatic disease. Doxorubicin is the current standard of care in
the first line setting for these patients. Doxorubicin treated ASTS
patients have a median overall survival of just 12-15 months,
likely due to the cumulative dose restriction of doxorubicin to 450
mg/m2. In
our planned Phase 2 study, patients randomized to the doxorubicin
cohort are expected to receive the standard of care dosing of
doxorubicin limited to 6 cycles (cumulative dose of ≤450
mg/m2).
Patients in the camsirubicin
cohort are planned to also receive 6 cycles of drug, but would be
allowed to continue on camsirubicin as long as they don’t
progress and the drug is well-tolerated. All patients on
camsirubicin will be given G-CSF prophylactically, to allow for
higher dosing of camsirubicin before running into the dose-limiting
neutropenia observed with all anthracyclines. The adverse event
profile of camsirubicin in the
previously completed Phase 2 ASTS trial suggests that, in the
presence of G-CSF, the dose of camsirubicin can be safely escalated beyond
265 mg/ m2
administered once every three weeks. The planned Phase 2 trial will
have a short run-in phase to dose-escalate camsirubicin when given
with G-CSF to further optimize the dose.
In
support of this strategy, we signed a clinical collaboration
agreement with Grupo Español de Investigación en Sarcomas
(“GEIS”) in June 2019. GEIS is a renowned non-profit
organization in Spain engaged in the research, development and
management of studies and clinical trials for sarcoma, that has
worked with many of the leading biotech and global pharma
companies. Pursuant to our clinical collaboration agreement, GEIS
will be the study sponsor and will lead a multi-country,
randomized, open-label Phase 2 clinical trial to evaluate
camsirubicin head-to-head against doxorubicin in patients with
ASTS. Enrollment of the trial is currently expected to begin in
the first quarter of 2020, and to include
approximately 170 ASTS patients, an interim analysis, and take
around 2 years to enroll. The endpoint for this Phase 2 study will
be PFS, with overall response rate (ORR) and median overall
survival (mOS) as secondary endpoints. This trial is anticipated to
include approximately 170 patients randomized to achieve a
p<0.05 with 80% power. Camsirubicin has orphan drug designation in
the US, and with the precedent of drugs getting accelerated
approval in ASTS, positive results in this study could conceivably
support a rapid path to approval. We will provide study drug to
GEIS and supplemental financial support for the clinical
trial.
Camsirubicin Clinical
Data
Several
clinical studies of camsirubicin have been
completed.
In
October 2013, a Phase 1 dose escalation study conducted at the
University of Iowa completed enrolment of 24 patients who received
one of eight different dose levels of camsirubicin ranging from 14 to 265
mg/m2. No
evidence of irreversible cardiotoxicity was observed in any of
these patients, including 4 patients who received prior
anthracycline (doxorubicin or related molecules) treatment.
Stable disease was observed in
55.0% of patients in this Phase 1 study, including 3 out of
4 patients with leiomyosarcoma, which is a type of soft tissue
sarcoma that originates in connective tissue and smooth muscle most
commonly in the uterus, stomach and small intestine. No growth
factor support (G-CSF) was given to patients, and the limiting
toxicity was neutropenia.
In
January 2015, a multi-center open label single arm Phase 2 clinical
trial was initiated in doxorubicin-naïve patients with ASTS.
This Phase 2 clinical trial enrolled 22 patients and was completed
in August 2016. Camsirubicin
was administered intravenously at 265 mg/m2 every 3 weeks for up
to 16 doses, with all patients being given growth factor support,
and there was clear indication of anticancer activity at this
well-tolerated dose and schedule. 52.6% of patients
evaluable for tumor progression demonstrated clinical
benefit (stable disease or partial response), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2). The progression
free survival at 6 months was 38%, similar to the 6 month PFS of
doxorubicin (three recent studies showed 23%, 25%, and 33% 6 month
PFS for doxorubicin). Camsirubicin was very well tolerated in this
study and underscored the potential ability to administer
camsirubicin without restriction for cumulative dose in patients
with ASTS. Under compassionate use access, one patient received 20
cycles of camsirubicin
(cumulative dose 5,300 mg/m2). Apart from one
patient who developed febrile neutropenia and severe leukopenia,
there were no grade 4 toxicities reported and no grade 3 side
effects other than anemia. A transient decrease in left ventricular
ejection fraction (“LVEF”) was observed in four
patients treated with camsirubicin. These decreases in LVEF in
camsirubicin treated patients
were not serious adverse events and were transient, with LVEF
subsequently returning to normal levels in all four subjects.
Despite some subjects in this study receiving camsirubicin for up to 20 cycles, effects
on cardiac function were of no clinical significance and there was
no evidence of irreversible heart failure in any
subject.
Camsirubicin Preclinical
Data
In
preclinical studies, camsirubicin showed a lack of acute as well
as chronic functional cardiotoxicity, and did not cause the cardiac
histopathologic lesions observed with doxorubicin in a chronic
rabbit model. Below is in
vitro data showing the lack of altered contractility with
acute exposure of rabbit atria to camsirubicin, even at high
concentrations:
Camsirubicin Cardiac Contractility
Camsirubicin demonstrated limited effect on cardiac
contractility, in-line with control
Chronic
administration of camsirubicin
two times per week through IV administration into rabbits over 13
weeks also showed a lack of cardiotoxicity of camsirubicin when compared to doxorubicin
(“DOX”). Echocardiography was performed weekly to
obtain left ventricular fractional shortening (“LVFS”)
measurements to assess cardiac function. At sacrifice, all six
doxorubicin-treated rabbits showed cardiac dysfunction by
echocardiography, and LVFS was significantly different from control
values (p<0.001). In contrast, none of the camsirubicin-treated rabbits exhibited
cardiac dysfunction by echocardiography at any time during the
study. Below is a graph of the results:
Weekly
Cardiac Echos
None of
the camsirubicin treated
rabbits showed significant cardiac dysfunction compared to the
vehicle control.
At the
conclusion of the 13 weeks of drug dosing, the rabbits were
sacrificed and the left atria were studied to assess cardiac
function ex vivo. Atria
from the doxorubicin-treated rabbits had impaired cardiac
contractility (dF/dt) compared to controls over the entire
force-frequency range (1, 2 and 3 Hz). Cardiac contractility for
the camsirubicin treated cohort
was not significantly different than the vehicle control. Below is
a graph of the results:
Camsirubicin Cardiac Contractility
Cardiac
contractility (dF/dt) of isolated atria at the three contraction
rates (1, 2, and 3 contractions/sec) obtained from rabbits
chronically infused with either doxorubicin, camsirubicin or saline vehicle (control).
Values are mean, error bars are standard error of the mean (SEM).
Camsirubicin demonstrated
limited effect on cardiac contractility, in-line with
placebo.
Finally,
cardiac scoring by a histopathologist of the left ventricle walls
obtained from the rabbits in this study showed increased
microscopic injury in hearts from doxorubicin-treated rabbits
compared to hearts from rabbits administered the vehicle control.
Heart tissues from camsirubicin-treated rabbits were the same
as the vehicle controls.
MNPR-101 (formerly huATN-658)
MNPR-101 is a
humanized monoclonal antibody designed to bind a specific cell
surface receptor found on cancer cells, the urokinase plasminogen
activator receptor (“uPAR”), and to interrupt several
pathways required for tumor growth and progression. MNPR-101
represents a novel approach for drug targeting of uPAR as it does
not interfere with normal binding of uPA to uPAR. It blocks the
CD11b (alpha-M)-uPAR interaction, a possible regulator of tumor
immunity expressed by myeloid derived suppressor cells. MNPR-101 is
believed to have potential activity against many different cancer
types because it:
●
is selectively
expressed on metastatic tumor, tumor-associated immune, and
angiogenic endothelial cells, but not on most normal cells (several
Phase 1 positron emission tomography (PET) imaging studies in human
advanced cancer patients show that uPAR can only be detected in the
tumor and not in normal tissues);
●
is
central to several extracellular and intracellular oncogenic
pathways required for metastasis (inhibiting the uPA system in turn
inhibits many other downstream targets, such as MAPK, AKT, MEK, and
FAK, that are currently being targeted by other
companies);
●
is
expressed on immune cells that allow the tumor to evade recognition
by the immune system;
●
mediates
antibody-dependent cellular cytotoxicity (ADCC); and
●
has the
potential to interfere at several different signaling pathways that
converge at uPAR.
MNPR-101 Preclinical Studies
MNPR-101 has
demonstrated significant anti-tumor activity as a monotherapy in
numerous preclinical models of tumor growth as well as enhanced
effect of multiple approved chemotherapeutics when used in
combination in vivo.
MNPR-101 Development Strategy
Based
upon the non-overlapping toxicity and distinct mechanism of action,
we plan to develop MNPR-101 in combination with existing cancer
therapies. The selective expression of uPAR in tumors underpins our
expectation that MNPR-101 will be well-tolerated and amenable to a
variety of treatment approaches, including combinations
with
existing treatments, radiopharmaceutical, and antibody drug
conjugate approaches. Published preclinical data have shown the
ability of MNPR-101 to enhance the anti-tumor activity of
chemotherapies such as paclitaxel and gemcitabine. The expression
and targeting of uPAR, in general, also suggests that MNPR-101 may
combine with other targeted agents that mediate signaling leading
to tumor growth including the ability of tumors to evade immune
response. In particular, uPAR is selectively expressed on cells of
the myeloid lineage such as myeloid derived suppressor cells,
neutrophils and macrophages, all of which drive tumor progression
and may mediate resistance to immune checkpoint inhibitors. Our
current thinking is to run a Phase 1a/1b trial in indications where
uPAR expression is highly prevalent, and explore novel combinations
in the Phase 1b portion. These indications could include
pancreatic, glioblastoma, metastatic breast, metastatic melanoma,
and ovarian cancers.
Aside
from manufacturing, we expect to continue IND-enabling studies in
order to file an IND with the FDA.
Partnerships,
Licensing, and Acquisition
Since
our inception, we have entered into three material business
development agreements, one with Onxeo S.A., one with XOMA (US)
LLC, and one with Cancer Research UK, which has since been
terminated. None of the agreements have required any issuance of
equity or any annual maintenance fee. See the summary of the two
ongoing material agreements below.
Onxeo, S.A.
In June
2016, we executed an agreement with Onxeo S.A., a French public
company, which gave us the option to license Validive (clonidine
mucobuccal tablet), a mucoadhesive tablet of clonidine based on the
Lauriad® mucoadhesive technology to potentially prevent and
treat severe oral mucositis in patients undergoing treatment for
head and neck cancers. The pre-negotiated license terms included as
part of the option agreement included clinical, regulatory,
developmental and sales milestones that could reach up to a total
of $108 million if we achieve all milestones, and in addition
escalating royalties of 5% to 10% on net sales. On September 8,
2017, pursuant to the Onxeo license option agreement, we exercised
the option to license Validive for $1 million. The exercise of the
option assigns all of Onxeo’s rights to the Validive
intellectual property to us, which allows us to commence the
planning of our Phase 3 clinical development program in severe oral
mucositis. Under the agreement, we are required to pay royalties to
Onxeo on a product-by-product and country-by-country basis until
the later of (1) the date when a given product is no longer within
the scope of a patent claim in the country of sale or manufacture,
(2) the expiry of any extended exclusivity period in the relevant
country (such as orphan drug exclusivity, pediatric exclusivity,
new chemical entity exclusivity, or other exclusivity granted
beyond the expiry of the relevant patent), or (3) a specific time
period after the first commercial sale of the product in such
country. In most countries, including the U.S., the patent term is
generally 20 years from the earliest claimed filing date of a
non-provisional patent application in the applicable country, not
taking into consideration any potential patent term adjustment that
may be filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever our royalty payment obligations with respect
to such product have expired. The agreement may also be terminated
early for cause if either we or Onxeo materially breach the
agreement, or if either we or Onxeo become insolvent. We may also
choose to terminate the agreement, either in its entirety or as to
a certain product and a certain country, by providing Onxeo with
advance notice.
XOMA
To
humanize our MNPR-101 antibody, we have taken a non-exclusive
license to XOMA (US) LLC’s humanization technology and
know-how. Humanization involves replacing most of the non-critical
parts of the mouse sequence of an antibody with the human sequence
to minimize the ability of the human immune system to recognize
this antibody as foreign. As such, MNPR-101 has been engineered to
be 95% human sequence using the XOMA technology. Under the terms of
the license, we are to pay only upon developmental and sales
milestone achievements which could reach up to $14.925 million if
we achieve all milestones. The agreement does not require the
payment of sales royalties. There can be no assurance that we will
reach any milestones. The first milestone payment is payable upon
first dosing of a human patient in a Phase 2 clinical
trial.
Intellectual
Property Portfolio and Exclusivity
An
important part of our strategy is obtaining patent protection to
help preserve the proprietary nature of our product candidates, and
to prevent others from developing competitive agents that are
similar. Our patent portfolio includes issued patents and pending
patent applications in the U.S. and in foreign countries. Our
general practice is to seek patent protection in major markets
worldwide.
Validive
We
license all intellectual property related to Validive from Onxeo
S.A., a French public company. See “Business –
Partnerships, Licensing and Acquisition”. Validive is covered
by 31 issued patents in 30 jurisdictions, including the U.S., EU,
Japan, and other Asian countries, and has orphan drug designation
in the EU as well as Fast Track designation from the FDA. These
patents are method of use patents that cover the use of Validive to
prevent and/or treat inflammation and inflammatory pain of the
mucosa including cancer therapy-induced mucositis, and have been
assigned to us pursuant to our license agreement with Onxeo. These
patents expire in 2029 not accounting for possible
extensions.
Camsirubicin
Camsirubicin (GPX-150) is covered by
manufacturing process patents. We have a patent for chemical
synthesis technology that efficiently converts cardiotoxic
“13-keto” anthracyclines such as doxorubicin,
daunorubicin, epirubicin, and idarubicin into novel, patentable,
and most likely less-cardiotoxic “5-imino-13-deoxy”
analogs. A novel chemical composition of an intermediate for this
synthesis is also patented. In addition, we have a patent covering
the combination of camsirubicin
with paclitaxel for the treatment of cancer, plus covering the
method of use of these two drugs for this purpose. Our camsirubicin patent portfolio contains
seven issued U.S. patents (two of which have expired) and one U.S.
pending patent application. We have certain corresponding patents
and applications in twenty-nine foreign jurisdictions, including
the U.S., EU, Japan, and other Asian countries. The process patents
for the synthesis of camsirubicin intermediates will expires in
2024 and the patents covering the combination use of camsirubicin and its analogs with taxanes
will expire in 2026. We may pursue patent term extensions where
appropriate. We have obtained patent protection around the
intermediates and process used to manufacture camsirubicin and we expect to obtain
Hatch-Waxman exclusivity (applicable to new chemical entities) for
5 years that will prevent generic competition. We have also
obtained U.S. orphan drug status in soft tissue sarcoma with
additional orphan cancer indications expected to follow. In
addition, we have a pending International Nonproprietary Name
(“INN”) request with the World Health Organization for
a non-proprietary (generic) name for camsirubicin.
MNPR-101
Our
patent portfolio for our MNPR-101 antibody (huATN-658), as well as
its epitope, consists of two issued U.S. composition of matter and
their methods of use patents and corresponding (granted and
pending) patents and patent applications in twenty-two foreign
jurisdictions, including the European Union, Japan, and other Asian
countries. These patents are owned by us. The patents covering the
composition of matter of MNPR-101 will expire in 2025 and the
patents covering the MNPR-101 epitope will expire in 2027. Being a
novel biologic, it is eligible for 12 years of exclusivity in the
U.S. under the Biologics Price Competition and Innovation Act
(“BPCI Act”), and in numerous other countries it will
benefit from varying durations of similar exclusivity, as
well.
Patent
life determination depends on the date of filing of the application
and other factors as promulgated under the patent laws. In most
countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date (the priority date) of
a non-provisional patent application in the applicable country, not
taking into consideration any potential patent term adjustment that
may be filed in the future or any regulatory extensions that may be
obtained. Some of our patents are currently near expiration and we
may pursue patent term extensions for these where appropriate. See
“Risk Factors – Risks Related to our Intellectual
Property”.
Manufacturing
We do
not currently own or operate manufacturing facilities for the
production or testing of Validive, camsirubicin, or MNPR-101, nor do we have
plans to develop our own manufacturing operations in the
foreseeable future. We presently depend on third-party contract
manufacturers for all our required raw materials, Active
Pharmaceutical Ingredients (“API”), and finished drug
products for our preclinical and clinical studies. We have executed
a manufacturing agreement for the next clinical batch of drug
product for Validive, which will provide sufficient drug to
complete the Phase 3 trials. We have not yet secured a
manufacturing agreement for camsirubicin or MNPR-101.
Sales
and Marketing
In
light of our stage of development, we have not yet established a
commercial organization or distribution capabilities. We have
retained worldwide commercial rights for our product candidates. If
our product candidates receive marketing approval, we plan to
commercialize them in the U.S. and potentially in Europe with our
own focused, specialty sales force. We would expect to conduct most
of the buildout of this organization following approval in the U.S.
or following similar marketing authorizations in Europe of any of
our product candidates. We expect to explore commercialization of
Validive and potentially other product candidates in certain
markets outside the U.S., including the EU, utilizing a variety of
collaboration, distribution and other sales and marketing
arrangements with one or more third parties.
Oncology
Market Competition
The
pharmaceutical industry in general, and the oncology therapeutics
sector in particular, are characterized by intense competition. We
face competition from pharmaceutical and biotechnology companies,
many of which are larger and better financed than us. We also face
competition in our efforts to develop and commercialize new
oncology therapeutics from academic and government laboratories.
The therapeutics that we are developing, if successfully
commercialized, will have to compete with existing therapeutics
already on the market and novel therapeutics currently in
development, as well as new therapeutics that may be discovered and
developed in the future. Our product candidates will also have to
compete with alternate treatment modalities, such as improvements
in radiation treatments, which is also subject to continual
innovation and improvement. Additional information can be found in
the section entitled “Risk Factors – Risks Related to
Our Business Operations and Industry.”
There
is no effective standard of care or FDA approved preventive or
therapeutic treatment for patients that develop
chemoradiation-induced SOM. Only symptomatic treatments such as
opioids and palliative mouthwashes are available but have no effect
on the occurrence, time to onset, or duration of SOM. Our primary
competitor is a dismutase mimetic in early Phase 3
clinical development, which is administered through a daily
60-minute intravenous (“IV”) infusion to be completed
within an hour before each radiation treatment. Validive, in
comparison, acts locally at the sites of SOM and is a once a day
self-administered oral/buccal tablet.
For our
camsirubicin program, we
believe, if approved, it could replace doxorubicin as the
1st line
treatment for ASTS. In addition, we believe that camsirubicin would
compete with a number of currently available anthracycline-based
drugs on the market for other cancer indications. These are largely
derivatives of doxorubicin, or reformulations of doxorubicin such
as liposomal doxorubicin (e.g. Doxil, owned by Johnson &
Johnson). All of these have the issue of cardiotoxicity. In
addition to approved products, there are a number of product
candidates in development, largely as new formulations or
derivatives of doxorubicin.
For our
MNPR-101 program, it is in the very early stages of development and
the most susceptible to all of the competitive factors listed in
the first paragraph of this section.
Government
Regulation and Product Approval
Government
authorities in the U.S., at the federal, state and local level, and
other countries extensively regulate, among other things, the
research, development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion,
advertising, distribution, post-approval monitoring and reporting,
marketing and export and import of products such as those we are
developing. The pharmaceutical product candidates that we develop
must be approved by the FDA before they may be legally marketed in
the U.S. See “Risk Factors – Risks Related to Clinical
Development and Regulatory Approval”.
U.S.
Pharmaceutical Product Development Process
In the
U.S., the FDA regulates pharmaceutical products under the Federal
Food, Drug and Cosmetic Act (“FDCA”) and implementing
regulations. Pharmaceutical products are also subject to other
federal, state and local statutes and regulations. The process of
obtaining regulatory approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and
regulations require the expenditure of substantial time and
financial resources. Failure to comply with the applicable U.S.
requirements at any time during the product development process,
approval process or after approval, may subject an applicant to
administrative or judicial enforcement. FDA enforcement could
result in refusal to approve pending applications, withdrawal of an
approval, a clinical hold, warning letters, product recalls,
product seizures, total or partial suspension of production or
distribution injunctions, fines, refusals of government contracts,
restitution, disgorgement or civil or criminal penalties. Any
agency or judicial enforcement action could have a material adverse
effect on us. The process required by the FDA before a
non-biological pharmaceutical product may be marketed in the U.S.
generally involves the following:
●
Completion of
preclinical laboratory tests, animal studies and formulation
studies according to Good Laboratory Practices (“GLP”),
or other applicable regulations;
●
Submission to the
FDA of an Investigational New Drug application (“IND”),
which must become effective before human clinical studies may
begin;
●
Performance of
adequate and well-controlled human clinical studies according to
the FDA’s current Good Clinical Practices
(“GCP”), to establish the safety and efficacy of the
proposed pharmaceutical product for its intended use;
●
Submission to the
FDA of a New Drug Application (“NDA”) or Biologics
License Application (“BLA”), for a new pharmaceutical
product;
●
Satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities where the pharmaceutical product is produced to assess
compliance with the FDA’s current Good Manufacturing Practice
standards (“cGMP:”), to assure that the facilities,
methods and controls are adequate to preserve the pharmaceutical
product’s identity, strength, quality and
purity;
●
Potential FDA audit
of the preclinical and clinical study sites that generated the data
in support of the NDA or BLA; and
●
FDA review and
approval of the NDA.
The
lengthy process of seeking required approvals and the continuing
need for compliance with applicable statutes and regulations
require the expenditure of substantial resources and approvals are
inherently uncertain.
Before
testing any compounds with potential therapeutic value in humans,
the pharmaceutical product candidate enters the preclinical testing
stage. Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies to
assess the potential safety and activity of the pharmaceutical
product candidate. These early proof-of-principle studies are done
using sound scientific procedures and thorough documentation. The
conduct of the single and repeat dose toxicology and toxicokinetic
studies in animals must comply with federal regulations and
requirements including GLP. The sponsor must submit the results of
the preclinical tests, together with manufacturing information,
analytical data, any available clinical data or literature and a
proposed clinical protocol, to the FDA as part of the IND. The IND
automatically becomes effective 30 days after receipt by the FDA,
unless the FDA has concerns and notifies the sponsor. In such a
case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical study can begin. If resolution cannot
be reached within the 30-day review period, either the FDA places
the IND on clinical hold or the sponsor withdraws the application.
The FDA may also impose clinical holds on a pharmaceutical product
candidate at any time before or during clinical studies due to
safety concerns or non-compliance. Accordingly, it is not certain
that submission of an IND will result in the FDA allowing clinical
studies to begin, or that, once begun, issues will not arise that
suspend or terminate such clinical studies.
During
the development of a new drug, sponsors are given opportunities to
meet with the FDA at certain points. These points may be prior to
submission of an IND, at the end of Phase 2, and before an NDA or
BLA is submitted. Meetings at other times may be requested. These
meetings can provide an opportunity for the sponsor to share
information about the data gathered to date, for the sponsor to ask
specific questions to the FDA, for the FDA to provide advice, and
for the sponsor and FDA to reach agreement on the next phase of
development. Sponsors typically use the end of Phase 2 meeting to
discuss their Phase 2 clinical results and present their plans for
the pivotal Phase 3 clinical (registration) trial(s) that they
believe will support approval of the new drug. A sponsor may be
able to request a Special Protocol Assessment (“SPA”),
the purpose of which is to reach agreement with the FDA on the
Phase 3 clinical trial protocol design and analyses that will form
the primary basis of an efficacy claim.
According to FDA
guidance for industry on the SPA process, a sponsor which meets the
prerequisites may make a specific request for a SPA and provide
information regarding the design and size of the proposed clinical
trial. The FDA’s goal is to evaluate the protocol within 45
days of the request to assess whether the proposed trial is
adequate, and that evaluation may result in discussions and a
request for additional information. A SPA request must be made
before the proposed trial begins, and all open issues must be
resolved before the trial begins. If a written agreement is
reached, it will be documented and made part of the IND record. The
agreement will be binding on the FDA and may not be changed by the
sponsor or the FDA after the trial begins except with the written
agreement of the sponsor and the FDA or if the FDA determines that
a substantial scientific issue essential to determining the safety
or efficacy of the drug was identified after the testing
began.
Clinical studies
involve the administration of the pharmaceutical product candidate
to healthy volunteers or patients under the supervision of
qualified investigators, generally physicians not employed by or
under the clinical study sponsor’s control. Clinical studies
are conducted under protocols detailing, among other things, the
objectives of the clinical study, dosing procedures, subject
selection and exclusion criteria, how the results will be analyzed
and presented and the parameters to be used to monitor subject
safety. Each protocol must be submitted to the FDA as part of the
IND. Clinical studies must be conducted in accordance with Good
Clinical Practice (“GCP”) guidelines. Further, each
clinical study must be reviewed and approved by an independent
institutional review board (“IRB”), at, or servicing,
each institution at which the clinical study will be conducted. An
IRB is charged with protecting the welfare and rights of study
participants and is tasked with considering such items as whether
the risks to individuals participating in the clinical studies are
minimized and are reasonable in relation to anticipated benefits.
The IRB also approves the informed consent form that must be
provided to each clinical study subject or his or her legal
representative and must monitor the clinical study until
completed.
Human
clinical studies are typically conducted in three sequential phases
that may overlap or be combined:
●
Phase 1. The
pharmaceutical product is initially introduced into healthy human
subjects and tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion.
●
Phase 2. The
pharmaceutical product is evaluated in a limited patient population
to identify possible adverse effects and safety risks, to
preliminarily evaluate the efficacy of the product for specific
targeted diseases, to determine dosage tolerance, optimal dosage
and dosing schedule and to identify patient populations with
specific characteristics where the pharmaceutical product may be
more effective.
●
Phase 3. Clinical
studies are undertaken to further evaluate dosage, clinical
efficacy and safety in an expanded patient population at
geographically dispersed clinical study sites. These clinical
studies are intended to establish the overall risk/benefit ratio of
the product and provide an adequate basis for product labeling. The
studies must be well-controlled and usually include a control arm
for comparison. One or two Phase 3 studies are required by the FDA
for an NDA or BLA approval, depending on the disease severity and
other available treatment options.
●
Post-approval
studies, or Phase 4 clinical studies, may be conducted after
initial marketing approval. These studies are used to gain
additional experience from the treatment of patients in the
intended therapeutic indication.
●
Progress reports
detailing the results of the clinical studies must be submitted at
least annually to the FDA and written IND safety reports must be
submitted to the FDA and the investigators for serious and
unexpected adverse events or any finding from tests in laboratory
animals that suggests a significant risk for human subjects. Phase
1, Phase 2 and Phase 3 clinical studies may not be completed
successfully within any specified period, if at all. The FDA or the
sponsor or its data safety monitoring board may suspend a clinical
study at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of
a clinical study at its institution if the clinical study is not
being conducted in accordance with the IRB’s requirements or
if the pharmaceutical product has been associated with unexpected
serious harm to patients.
Concurrent with
clinical studies, companies usually complete additional animal
studies and must also develop additional information about the
chemistry and physical characteristics of the pharmaceutical
product as well as finalize a process for manufacturing the product
in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing
quality batches of the pharmaceutical product candidate and, among
other things, must develop methods for testing the identity,
strength, quality and purity of the final pharmaceutical product.
Additionally, appropriate packaging must be selected and tested and
stability studies must be conducted to demonstrate that the
pharmaceutical product candidate does not undergo unacceptable
deterioration over its shelf life.
U.S.
Review and Approval Processes
The
results of product development, preclinical studies and clinical
studies, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the pharmaceutical
product, proposed labeling and other relevant information are
submitted to the FDA as part of an NDA or BLA requesting approval
to market the product. The submission of an NDA or BLA is subject
to the payment of substantial user fees; a waiver of such fees may
be obtained under certain limited circumstances.
In
addition, under the Pediatric Research Equity Act
(“PREA”), an NDA, BLA or a supplement thereof must
contain data to assess the safety and effectiveness of the
pharmaceutical product for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product is safe and
effective. The FDA may grant deferrals for submission of data or
full or partial waivers. Unless otherwise required by regulation,
PREA does not apply to any pharmaceutical product for an indication
for which orphan designation has been granted.
The FDA
reviews all NDAs and BLAs submitted before it accepts them for
filing and may request additional information rather than accepting
an NDA or BLA for filing. Once the submission is accepted for
filing, the FDA begins an in-depth review of the NDA or BLA. Under
the goals and policies agreed to by the FDA under the Prescription
Drug User Fee Act (“PDUFA”), the FDA has 10 months in
which to complete its initial review of a standard NDA or BLA and
respond to the applicant, and six months for a priority NDA or BLA.
The FDA does not always meet its PDUFA goal dates for standard and
priority NDAs or BLAs. The review process and the PDUFA goal date
may be extended by three months if the FDA requests or if the NDA
or BLA sponsor otherwise provides additional information or
clarification regarding information already provided in the
submission within the last three months before the PDUFA goal
date.
After
the NDA or BLA submission is accepted for filing, the FDA reviews
the NDA or BLA application to determine, among other things,
whether the proposed product is safe and effective for its intended
use, and whether the product is being manufactured in accordance
with cGMP to assure and preserve the product’s identity,
strength, quality and purity. The FDA may refer applications for
novel pharmaceutical products or pharmaceutical products which
present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other
experts, for review, evaluation and a recommendation as to whether
the application should be approved and under what conditions. The
FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making
decisions. During the pharmaceutical product approval process, the
FDA also will determine whether a risk evaluation and mitigation
strategy (“REMS”), is necessary to assure the safe use
of the pharmaceutical product. If the FDA concludes that a REMS is
needed, the sponsor of the NDA or BLA must submit a proposed REMS;
the FDA will not approve the NDA or BLA without a REMS, if
required.
Before
approving an NDA or BLA, the FDA will inspect the facilities at
which the product is manufactured. The FDA will not approve the
product unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to
assure consistent production of the product within required
specifications. Additionally, before approving an NDA or BLA, the
FDA will typically inspect one or more clinical sites as well as
the site where the pharmaceutical product is manufactured to assure
compliance with GCP and cGMP. If the FDA determines the
application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information. In
addition, the FDA will require the review and approval of product
labeling.
The NDA
and BLA review and approval process is lengthy and difficult and
the FDA may refuse to approve an NDA or BLA if the applicable
regulatory criteria are not satisfied or may require additional
clinical data or other data and information. Even if such data and
information are submitted, the FDA may ultimately decide that the
NDA or BLA does not satisfy the criteria for approval. Data
obtained from clinical studies are not always conclusive and the
FDA may interpret data differently than the sponsor interprets the
same data. The FDA will issue a complete response letter if the
agency decides not to approve the NDA or BLA. The complete response
letter usually describes all of the specific deficiencies in the
NDA or BLA identified by the FDA. The deficiencies identified may
be minor, for example, requiring labeling changes, or major, for
example, requiring additional clinical studies. Additionally, the
complete response letter may include recommended actions that the
applicant might take to place the application in a condition for
approval. If a complete response letter is issued, the applicant
may either resubmit the NDA or BLA, addressing all of the
deficiencies identified in the letter, or withdraw the
application.
If a
product receives regulatory approval, the approval may be
significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict
the commercial value of the product. Further, the FDA may require
that certain contraindications, warnings or precautions be included
in the product labeling. In addition, the FDA may require Phase 4
testing which involves clinical studies designed to further assess
pharmaceutical product safety and effectiveness and may require
testing and surveillance programs to monitor the safety of approved
products that have been commercialized.
Expedited
Development and Review Programs
The FDA
has a Fast Track program that is intended to expedite or facilitate
the process for reviewing new pharmaceutical products that meet
certain criteria. Specifically, new pharmaceutical products are
eligible for Fast Track designation if they are intended to treat a
serious or life-threatening condition and demonstrate the potential
to address unmet medical needs for the condition. The Fast Track
designation must be requested by the sponsor. Fast Track
designation applies to the combination of the product and the
specific indication for which it is being studied. With a Fast
Track designated product, the FDA may consider for review sections
of the NDA or BLA on a rolling basis before the complete
application is submitted, if the sponsor provides a schedule for
the submission of the sections of the NDA or BLA, if the FDA agrees
to accept sections of the NDA or BLA and determines that the
schedule is acceptable and if the sponsor pays any required user
fees upon submission of the first section of the NDA or
BLA.
Any
product submitted to the FDA for marketing approval, including a
Fast Track program, may also be eligible for other types of FDA
programs intended to expedite development and review, such as
priority review and accelerated approval. Any product is eligible
for priority review if it has the potential to provide safe and
effective therapy where no satisfactory alternative therapy exists
or a significant improvement in the treatment, diagnosis or
prevention of a disease compared to marketed products. The FDA will
attempt to direct additional resources to the evaluation of an
application for a new pharmaceutical product designated for
priority review in an effort to facilitate the review.
Additionally, a product may be eligible for accelerated approval.
Pharmaceutical products studied for their safety and effectiveness
in treating serious or life-threatening illnesses and that provide
meaningful therapeutic benefit over existing treatments may receive
accelerated approval, which means that the products may be approved
on the basis of adequate and well-controlled clinical studies
establishing that the product has an effect on a surrogate endpoint
that is reasonably likely to predict a clinical benefit, or on the
basis of an effect on a clinical endpoint other than survival or
irreversible morbidity. As a condition of approval, the FDA may
require that a sponsor of a pharmaceutical product receiving
accelerated approval perform adequate and well-controlled
post-marketing clinical studies. In addition, the FDA currently
requires as a condition for accelerated approval pre-approval of
promotional materials, which could adversely impact the timing of
the commercial launch of the product. Fast Track designation,
priority review and accelerated approval do not change the
standards for approval but may expedite the development or approval
process.
Breakthrough
Therapy Designation
The
FDA is also required to expedite the development and review of the
application for approval of drugs that are intended to treat a
serious or life-threatening disease or condition where preliminary
clinical evidence indicates that the drug may demonstrate
substantial improvement over existing therapies on one or more
clinically significant endpoints. Under the breakthrough therapy
program, the sponsor of a new product candidate may request that
the FDA designate the product candidate for a specific indication
as a breakthrough therapy concurrent with, or after, the filing of
the IND for the product candidate. The FDA must determine if the
product candidate qualifies for breakthrough therapy designation
within 60 days of receipt of the sponsor’s request. Validive,
camsirubicin and MNPR-101 may all be eligible for breakthrough
therapy designation pending additional data.
European
Union Drug Review and Approval
In the
European Economic Area (“EEA”) (which is comprised of
the 28 Member States of the European Union plus Norway, Iceland and
Liechtenstein), medicinal products can only be commercialized after
obtaining a Marketing Authorization (“MA”). There are
two types of MA:
The
Community MA, which is issued by the European Commission through
the Centralized Procedure, based on the opinion of the CHMP, or
Committee for Medicinal Products for Human Use, of the European
Medicines Agency (“EMA”), is valid throughout the
entire territory of the EEA. The Centralized Procedure is mandatory
for certain types of products, such as biotechnology medicinal
products, orphan medicinal products, and medicinal products
containing a new active substance indicated for the treatment of
AIDS, cancer, neurodegenerative disorders, diabetes and auto-immune
and viral diseases. The Centralized Procedure is optional for
products containing a new active substance not yet authorized in
the EEA, or for products that constitute a significant therapeutic,
scientific or technical innovation or which are in the interest of
public health in the EU.
National MAs, which
are issued by the competent authorities of the Member States of the
EEA and only cover their respective territory, are available for
products not falling within the mandatory scope of the Centralized
Procedure. Where a product has already been authorized for
marketing in a Member State of the EEA, this National MA can be
recognized in other Member States through the Mutual Recognition
Procedure. If the product has not received a National MA in any
Member State at the time of application, it can be approved
simultaneously in various Member States through the Decentralized
Procedure. Under the above described procedures, before granting
the MA, the EMA or the competent authorities of the Member States
of the EEA make an assessment of the risk-benefit balance of the
product on the basis of scientific criteria concerning its quality,
safety and efficacy.
PRIME Designation
The EMA
launched its PRIME regulatory initiative to enhance support for the
development of therapies that target an unmet medical need. The
initiative focuses on drugs that may offer a major therapeutic
advantage over existing treatments, or benefit patients with no
treatment options. These therapies are considered priority
medicines within the EU. Through PRIME, the EMA offers early,
proactive and enhanced support to drug developers to optimize the
generation of robust data on a therapy’s benefits and risks
and enable accelerated assessment of drug applications. MNPR-101
may be eligible for PRIME designation.
Post-Approval
Requirements
Any
pharmaceutical products for which a sponsor receives FDA approvals
are subject to continuing regulation by the FDA, including, among
other things, record-keeping requirements, reporting of adverse
experiences with the product, providing the FDA with updated safety
and efficacy information, product sampling and distribution
requirements, complying with certain electronic records and
signature requirements and complying with FDA and FTC promotion and
advertising requirements, which include, among others, standards
for direct-to-consumer advertising, prohibitions on promoting
pharmaceutical products for uses or in patient populations that are
not described in the pharmaceutical product’s approved
labeling (known as “off-label use”), industry-sponsored
scientific and educational activities and promotional activities
involving the internet. Failure to comply with FDA requirements can
have negative consequences, including adverse publicity,
enforcement letters from the FDA, actions by the U.S. Department of
Justice and/or U.S. Department of Health and Human Services Office
of Inspector General, mandated corrective advertising or
communications with doctors, and civil or criminal penalties.
Although physicians may prescribe legally available pharmaceutical
products for off-label uses, manufacturers may not directly or
indirectly market or promote such off-label uses.
Manufacturers of
FDA approved products are required to comply with applicable FDA
manufacturing requirements contained in the FDA’s cGMP
regulations. cGMP regulations require, among other things, quality
control and quality assurance, as well as the corresponding
maintenance of records and documentation. Pharmaceutical product
manufacturers and other entities involved in the manufacture and
distribution of approved pharmaceutical products are required to
register their establishments with the FDA and certain state
agencies, and are subject to periodic unannounced inspections by
the FDA and certain state agencies for compliance with cGMP and
other laws. Accordingly, manufacturers must continue to expend
time, money and effort in the area of production and quality
control to maintain cGMP compliance. Discovery of problems with a
product after approval may result in restrictions on a product,
manufacturer or holder of an approved NDA or BLA, including
withdrawal of the product from the market. In addition, changes to
the manufacturing process generally require prior FDA approval
before being implemented and other types of changes to the approved
product, such as adding new indications and additional labeling
claims, are also subject to further FDA review and approval. The
FDA also may require post-marketing testing, known as Phase 4
testing, risk minimization action plans and surveillance to monitor
the effects of an approved product or place conditions on an
approval that could restrict the distribution or use of the
product.
U.S.
Foreign Corrupt Practices Act
The
FCPA, prohibits certain individuals and entities from promising,
paying, offering to pay, or authorizing the payment of anything of
value to any foreign government official, directly or indirectly,
to obtain or retain business or an improper advantage. The U.S.
Department of Justice and the SEC have increased their enforcement
efforts with respect to the FCPA. Violations of the FCPA may result
in large civil and criminal penalties and could result in an
adverse effect on a company’s reputation, operations, and
financial condition. A company may also face collateral
consequences such as debarment and the loss of export
privileges.
Federal
and State Pharmaceutical Legislation
In
addition to FDA restrictions on marketing of pharmaceutical
products, several other types of state and federal laws have been
applied to restrict certain business practices in the
biopharmaceutical industry.
Anti-Kickback
Statute of 1972
The federal Anti-Kickback
Statute prohibits, among other things, knowingly and willfully
offering, paying, soliciting, or receiving remuneration to induce
or in return for purchasing, leasing, ordering, or arranging for
the purchase, lease, or order of any healthcare item or service
reimbursable under Medicare, Medicaid, or other federally financed
healthcare programs. The term “remuneration” has been
broadly interpreted to include anything of value, including for
example, gifts, discounts, the furnishing of supplies or equipment,
credit arrangements, payments of cash, waivers of payment,
ownership interests and providing anything at less than its fair
market value. The Anti-Kickback Statute has been interpreted to
apply to arrangements between pharmaceutical manufacturers on one
hand and prescribers, purchasers, and formulary managers on the
other. Although there are a number of statutory exemptions and
regulatory safe harbors protecting certain common activities from
prosecution, the exemptions and safe harbors are drawn narrowly,
and a company’s practices may not in all cases meet all of
the criteria for statutory exemptions or safe harbor protection.
Practices that involve remuneration that may be alleged to be
intended to induce prescribing, purchases, or recommendations may
be subject to scrutiny if they do not qualify for an exemption or
safe harbor. Several courts have interpreted the statute’s
intent requirement to mean that if any one purpose of an
arrangement involving remuneration is to induce referrals of
federal healthcare covered business, the statute has been violated.
The reach of the Anti-Kickback Statute was also broadened by the
PPACA, which, among other things, amends the intent requirement of
the federal Anti-Kickback Statute. Pursuant to the statutory
amendment, a person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it in order
to have committed a violation. In addition, the PPACA provides that
the government may assert that a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the civil
False Claims Act (discussed below) or the civil monetary penalties
statute, which imposes penalties against any person who is
determined to have presented or caused to be presented a claim to a
federal health program that the person knows or should know is for
an item or service that was not provided as claimed or is false or
fraudulent.
False
Claims Act of 1986
The federal False Claims Act
prohibits any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government.
Recently, several pharmaceutical and other healthcare companies
have been prosecuted under these laws for allegedly providing free
product to customers with the expectation that the customers would
bill federal programs for the product. Other companies have been
prosecuted for causing false claims to be submitted because of the
companies’ marketing of the product for unapproved, and thus
non-reimbursable, uses. Many states also have statutes or
regulations similar to the federal Anti-Kickback Statute and False
Claims Act, which state laws apply to items and services reimbursed
under Medicaid and other state programs, or, in several states,
apply regardless of the payer.
Health
Insurance Portability and Accountability Act of 1996
HIPAA created new federal
criminal statutes that prohibit knowingly and willfully executing a
scheme to defraud any healthcare benefit program, including private
third-party payers and knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially
false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services.
Because of the breadth of these laws and the narrowness of the
federal Anti-Kickback Statute’s safe harbors, it is possible
that some of a company’s business activities could be subject
to challenge under one or more of such laws. Such a challenge could
have a material adverse effect on a company’s business,
financial condition and results of operations. See “Risk
Factors – Risks Related to Commercialization of Our Product
Candidates”.
Health
Information Technology for Economic and Clinical Health Act of
2009
HIPAA, as amended by HITECH
and its implementing regulations, imposes certain requirements
relating to the privacy, security and transmission of individually
identifiable health information. Among other things, HITECH makes
HIPAA’s privacy and security standards directly applicable to
“business associates”—independent contractors or
agents of covered entities that receive or obtain protected health
information in connection with providing a service on behalf of a
covered entity. HITECH also increased the civil and criminal
penalties that may be imposed against covered entities, business
associates and possibly other persons, and gave state attorneys
general new authority to file civil actions for damages or
injunctions in federal courts to enforce the federal HIPAA laws and
seek attorney’s fees and costs associated with pursuing
federal civil actions. In addition, state laws govern the privacy
and security of health information in certain circumstances, many
of which differ from each other in significant ways and may not
have the same effect, complicating compliance efforts. See
“Risk Factors – Risks Related to Commercialization of
Our Product Candidates”.
The
Medicare Prescription Drug, Improvement and Modernization Act of
2003 (“MMA”)
In the U.S. and foreign
jurisdictions, there have been a number of legislative and
regulatory changes to the healthcare system, in particular, there
have been and continue to be a number of initiatives at the U.S.
federal and state levels that seek to reduce healthcare costs. The
MMA, imposed new requirements for the distribution and pricing of
prescription drugs for Medicare beneficiaries. Under Part D,
Medicare beneficiaries may enroll in prescription drug plans
offered by private entities, which will provide coverage of
outpatient prescription drugs. Part D plans include both
stand-alone prescription drug benefit plans and prescription drug
coverage as a supplement to Medicare Advantage plans. Unlike
Medicare Part A and B, Part D coverage is not standardized. Part D
prescription drug plan sponsors are not required to pay for all
covered Part D drugs, and each drug plan can develop its own drug
formulary that identifies which drugs it will cover and at what
tier or level. However, Part D prescription drug formularies must
include drugs within each therapeutic category and class of covered
Part D drugs, though not necessarily all the drugs in each category
or class. Any formulary used by a Part D prescription drug plan
must be developed and reviewed by a pharmacy and therapeutic
committee. Moreover, while the MMA applies only to drug benefits
for Medicare beneficiaries, private payers often follow Medicare
coverage policy and payment limitations in setting their own
payment rates. Any reduction in payment that results from Medicare
Part D may result in a similar reduction in payments from
non-governmental payers.
The
American Recovery and Reinvestment Act of 2009
The American Recovery and
Reinvestment Act of 2009 provides funding for the federal
government to compare the effectiveness of different treatments for
the same illness. A plan for the research will be developed by the
Department of Health and Human Services, the Agency for Healthcare
Research and Quality and the National Institutes for Health, and
periodic reports on the status of the research and related
expenditures will be made to Congress. Although the results of the
comparative effectiveness studies are not intended to mandate
coverage policies for public or private payers, it is not clear
what effect, if any, the research will have on the sales of any
product, if any such product or the condition that it is intended
to treat is the subject of a study.
Physician
Payments Sunshine Act of 2010
The federal Physician
Payments Sunshine Act requires certain manufacturers of drugs,
devices, biologics and medical supplies for which payment is
available under Medicare, Medicaid or the Children’s Health
Insurance Program, with specific exceptions, to report annually to
the Centers for Medicare & Medicaid Services
(“CMS”) information related to payments or other
transfers of value made to physicians and teaching hospitals, and
applicable manufacturers and applicable group purchasing
organizations to report annually to CMS ownership and investment
interests held by the physicians and their immediate family
members.
Patent
Protection and Affordable Care Act of 2010
In March 2010, the PPACA was
enacted, which includes measures to significantly change the way
healthcare is financed by both governmental and private insurers.
Among the provisions of the PPACA of importance to the
pharmaceutical and biotechnology industry are the
following:
●
extension of
manufacturers’ Medicaid rebate liability to covered drugs
dispensed to individuals who are enrolled in Medicaid managed care
organizations;
●
expansion of
eligibility criteria for Medicaid programs by, among other things,
allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for
certain individuals with income at or below 133% of the Federal
Poverty Level beginning in 2014, thereby potentially increasing
manufacturers’ Medicaid rebate liability;
●
expansion of the
entities eligible for discounts under the Public Health Service
pharmaceutical pricing program;
●
new requirements
under the federal Open Payments program, created under Section 6002
of the PPACA and its implementing regulations, that manufacturers
of drugs, devices, biologics and medical supplies for which payment
is available under Medicare, Medicaid or the Children’s
Health Insurance Program (with certain exceptions) report annually
to the U.S. Department of Health and Human Services
(“HHS”), information related to “payments or
other transfers of value” made or distributed to physicians
(defined to include doctors, dentists, optometrists, podiatrists
and chiropractors) and teaching hospitals, and that applicable
manufacturers and applicable group purchasing organizations report
annually to HHS ownership and investment interests held by
physicians (as defined above) and their immediate family members,
with data collection required beginning August 1, 2013 and
reporting to CMS, required by March 31, 2014 and by the 90th day of
each subsequent calendar year;
●
a requirement to
annually report drug samples that manufacturers and distributors
provide to physicians, effective April 1, 2012;
●
expansion of health
care fraud and abuse laws, including the False Claims Act and the
Anti-Kickback Statute, new government investigative powers, and
enhanced penalties for noncompliance;
●
a licensure
framework for follow-on biologic products;
●
a new
Patient-Centered Outcomes Research Institute to oversee, identify
priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research;
●
creation of the
Independent Payment Advisory Board which, beginning in 2014, will
have authority to recommend certain changes to the Medicare program
that could result in reduced payments for prescription drugs and
those recommendations could have the effect of law even if Congress
does not act on the recommendations; and
●
establishment of a
Center for Medicare Innovation at CMS to test innovative payment
and service delivery models to lower Medicare and Medicaid
spending, potentially including prescription drug spending that
began on January 1, 2011.
Budget
Control Act of 2011
In August 2011, the President
signed into law the Budget Control Act of 2011, which, among other
things, created the Joint Select Committee on Deficit Reduction, or
joint committee, to recommend proposals in spending reductions to
Congress. The joint committee did not achieve its targeted deficit
reduction of at least $1.2 trillion and for the years 2013 through
2021, triggering automatic reductions to several government
programs. These reductions include aggregate reductions to Medicare
payments to providers of up to 2% per fiscal year, starting in
2013.
American
Taxpayer Relief Act of 2012
In January 2013, the
President signed into law the American Taxpayer Relief Act of 2012,
which, among other things, reduced Medicare payments to several
providers and increased the statute of limitations period for the
government to recover overpayments to providers from three to five
years. These new laws may result in additional reductions in
Medicare and other healthcare funding.
Proposals
in Congress to repeal or replace parts of the PPACA
There have been a number of
proposals in the U.S. Congress to repeal or replace parts of the
PPACA. On December 22, 2017, the Tax Cuts and Jobs Act became law.
One of its provisions repealed what is known as the individual
mandate under PPACA, which could have the effect of negating such
law. Other proposals include the repeal of the tax on prescription
medications, repeal of the medical device excise tax for sales, and
repeal of the elimination of a deduction for expenses allocable to
Medicare Part D subsidy. It is uncertain whether any repeal or
replace legislation will be passed and signed into law or what
effect any such legislation may have on our commercialization
strategy. See “Risk Factors - Future Legislation or Executive
or Private Sector Action May Increase the Difficulty and Cost for
us to Commercialize our Products and Affect the Prices Obtained for
Such Products”.
Patent
Term Restoration and Marketing Exclusivity
Depending upon the timing,
duration and specifics of the FDA approval of the use of our
pharmaceutical product candidates, some of our products to be
licensed under U.S. patents may be eligible for limited patent term
extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly referred to as the Hatch-Waxman
Amendments. The Hatch-Waxman Amendments permits a patent
restoration term of up to five years as compensation for patent
term lost during product development and the FDA regulatory review
process. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years from the
product’s approval date. The patent term restoration period
is generally one-half the time between the effective date of an IND
and the submission date of an NDA or BLA plus the time between the
submission date of an NDA or BLA and the approval of that
application. Only one patent applicable to an approved
pharmaceutical product is eligible for the extension and the
application for the extension must be submitted prior to the
expiration of the patent. The U.S. Patent and Trademark Office
(“USPTO”), in consultation with the FDA, reviews and
approves the application for any patent term extension or
restoration.
Market exclusivity provisions under the U.S.
Food, Drug, and Cosmetic Act can also delay the submission or the
approval of certain applications of other companies seeking to
reference another company’s NDA or BLA.
The
Biologics Price Competition and Innovation Act (“BPCI
Act”)
The Biologics Price
Competition and Innovation Act, (“BPCI Act”),
authorizes the FDA to license a biological product that is
biosimilar to an FDA-licensed biologic through an abbreviated
pathway. The BPCI Act establishes criteria for determining that a
product is biosimilar to an already-licensed biologic, or reference
product, and establishes a process by which an abbreviated BLA for
a biosimilar product is submitted, reviewed and approved. The BPCI
Act provides periods of exclusivity that protect a reference
product from biosimilars competition. Under the BPCI Act, the FDA
may not accept a biosimilar application for review until four years
after the date of first licensure of the reference product, and the
biosimilar may not be licensed until at least 12 years after the
reference product’s approval. Additionally, the BPCI Act
establishes procedures by which the biosimilar applicant provides
information about its application and product to the reference
product sponsor, and by which information about potentially
relevant patents may be shared and litigation over patents may
proceed in advance of approval. The BPCI Act also provides a period
of exclusivity for the first biosimilar determined by the FDA to be
interchangeable with the reference product.
We anticipate that the
contours of the BPCI Act will continue to be defined as the statute
is implemented over a period of years. This likely will be
accomplished by a variety of means, including decisions related to
the statute by the relevant federal courts, FDA issuance of
guidance documents, and FDA decisions in the course of considering
specific applications. The FDA has to date issued various guidance
documents and other materials indicating the agency’s
thinking regarding a number of issues implicated by the BPCI Act.
Additionally, the FDA’s approval of several biosimilar
applications in recent years has helped define the agency’s
approach to certain issues.
Pharmaceutical
Coverage, Pricing and Reimbursement
Significant uncertainty
exists as to the coverage and reimbursement status of any
pharmaceutical product candidates for which we obtain regulatory
approval. In the U.S. and markets in other countries, sales of any
products for which we receive regulatory approval for commercial
sale will depend in part upon the availability of reimbursement
from third-party payers. Third-party payers include government
payers such as Medicare and Medicaid, managed care providers,
private health insurers and other organizations. The process for
determining whether a payer will provide coverage for a
pharmaceutical product may be separate from the process for setting
the price or reimbursement rate that the payer will pay for the
pharmaceutical product. Third-party payers may limit coverage to
specific pharmaceutical products on an approved list, or formulary,
which might not include all of the FDA-approved pharmaceutical
products for a particular indication. Third-party payers are
increasingly challenging the price and examining the medical
necessity and cost-effectiveness of medical products and services,
in addition to their safety and efficacy. We may need to conduct
expensive pharmaco-economic studies in order to demonstrate the
medical necessity and cost-effectiveness of its products, in
addition to the costs required to obtain the FDA approvals. A
payer’s decision to provide coverage for a pharmaceutical
product does not imply that an adequate reimbursement rate will be
approved.
In 2003, the federal
government enacted legislation providing a partial prescription
drug benefit for Medicare recipients, which became effective at the
beginning of 2006. However, to obtain payments under this program,
a company would be required to sell products to Medicare recipients
through prescription drug plans operating pursuant to this
legislation. As part of their participation in the Medicare
prescription drug program, these plans negotiate discounted prices
for prescription drugs. Federal, state and local governments in the
U.S. continue to consider legislation to limit the growth of health
care costs, including the cost of prescription drugs. Future
legislation and regulations could limit payments for
pharmaceuticals such as the product candidates that we are
developing.
Different pricing and
reimbursement schemes exist in other countries. In the European
Community, governments influence the price of pharmaceutical
products through their pricing and reimbursement rules and control
of national health care systems that fund a large part of the cost
of those products to consumers. Some jurisdictions operate positive
and negative list systems under which products may only be marketed
once a reimbursement price has been agreed upon. To obtain
reimbursement or pricing approval, some of these countries may
require the completion of clinical studies that compare the
cost-effectiveness of a particular pharmaceutical product candidate
to currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on health care costs
in general, particularly prescription drugs, has become very
intense. As a result, increasingly high barriers are being erected
to the entry of new products. In addition, in some countries,
cross-border imports from low-priced markets exert a commercial
pressure on pricing within a country.
International
Regulation
In addition to regulations in
the U.S., there are a variety of foreign regulations governing
clinical studies and commercial sales and distribution of our
future product candidates. Whether or not FDA approval is obtained
for a product, approval of a product must be obtained by the
comparable regulatory authorities of foreign countries before
clinical studies or marketing of the product can commence in those
countries. The approval process varies from country to country, and
the time may be longer or shorter than that required for FDA
approval. The requirements governing the conduct of clinical
studies, product licensing, pricing and reimbursement vary greatly
from country to country. In addition, certain regulatory
authorities in select countries may require us to repeat previously
conducted preclinical and/or clinical studies under specific
criteria for approval in their respective country which may delay
and/or greatly increase the cost of approval in certain markets
targeted for approval by us.
Under E.U. regulatory
systems, marketing applications for pharmaceutical products must be
submitted under a centralized procedure to the EMA. The centralized
procedure provides for the grant of a single marketing
authorization that is valid for all E.U. member states. The EMA
also has designations for Orphan Drugs, which, if applicable, can
provide for faster review, lower fees and more access to advice
during drug development. While the marketing authorization in the
European Union is centralized, the system for clinical studies
(application, review and requirements) is handled by each
individual country. Approval to run a clinical study in one country
does not guarantee approval in any other country. The
pharmaceutical industry in Canada is regulated by Health Canada. A
New Drug Submission (“NDS”) is the equivalent of a U.S.
NDA and must be filed to obtain approval to market a pharmaceutical
product in Canada. Marketing regulations and reimbursement are
subject to national and provincial laws. In Japan, applications for
approval to manufacture and market new drugs must be approved by
the Ministry of Health, Labor and Welfare. Nonclinical and clinical
studies must meet the requirements of Japanese laws. Results from
clinical studies conducted outside of Japan must be supplemented
with at least a bridging clinical study conducted in Japanese
patients.
In addition to regulations in
Europe, Canada, Japan and the U.S., there are a variety of foreign
regulations governing clinical studies, commercial distribution and
reimbursement of future product candidates which we may be subject
to as we pursue regulatory approval and commercialization of
Validive, camsirubicin,
MNPR-101, or any future product candidates
internationally.
Compliance with Environmental Laws
Since we do not have our own
laboratory facilities, we do not estimate any annual costs of
compliance with environmental laws.
Employees
Our operations are currently
managed (including our executive chairman and Acting Chief Medical
Officer) by five individuals, of whom three have a PhD, two have an
MD, one has an MBA, one has an MSc in health economics and policy,
and one was a former CPA. They have worked at industry leading
companies such as BioMarin Pharmaceutical Inc., Raptor
Pharmaceuticals, Abbott Laboratories, and Onyx Pharmaceuticals. As
of November 4, 2019, we had five employees; four of
them were full-time. We anticipate hiring additional employees in
clinical operations and regulatory to help manage our clinical
studies, regulatory submissions, and manufacturing to support
Validive program development. In addition, to complement our
internal expertise, we have contracts with medical and scientific
consultants, manufacturers, laboratories, and contract research
organizations that specialize in various aspects of drug
development including clinical development, preclinical
development, manufacturing and regulatory affairs. For information
regarding our executive officers, see the section entitled
“Executive Officers and Board Members.”
Description of Property
We lease approximately 1,202
square feet of space in the Village of Wilmette, Illinois for our
corporate offices, under a lease which runs through the end of
2019. In February 2019, on a month-to-month basis, we leased
additional office space at our corporate headquarters. We believe
that we will lease additional office space within the next 12
months as we begin to hire additional personnel.
Legal Proceedings
We are currently not, and to
date have never been, a party to any material legal
proceedings.
SHARES ELIGIBLE FOR FUTURE
SALE
Prior to this offering, there
has been no public market for our Common Stock. Future sales of
substantial amounts of our Common Stock in the public market, or
the perception that such sales may occur, could adversely affect
the market price of our Common Stock. Although we have applied to
have our Common Stock listed on Nasdaq, we cannot assure you that
there will be an active public market for our Common
Stock.
Based on the number of shares
of our Common Stock outstanding as of November 4, 2019
and assuming (1) the issuance of shares in this offering and
(2) no exercise of the underwriters’ option, we will
have outstanding an aggregate of approximately
11,513,644 shares of Common Stock.
Of these shares, all shares
sold in this offering will be freely tradable without restriction
or further registration under the Securities Act, except for any
shares purchased by our “affiliates,” as that term is
defined in Rule 144 under the Securities Act. Shares purchased by
our affiliates would be subject to the Rule 144 resale restrictions
described below, other than the holding period
requirement.
The remaining outstanding
shares of our Common Stock will be “restricted
securities,” as that term is defined in Rule 144 under the
Securities Act. These restricted securities are eligible for public
sale only if they are registered under the Securities Act or if
they qualify for an exemption from registration under Rule 144 or
701 under the Securities Act, each of which is summarized below. We
expect that some of these shares will be subject to
a 180-day lock-up period under
the lock-up agreements described
below.
In addition, of the 1,105,896
shares of our Common Stock that were subject to stock options
outstanding as of November 4, 2019, options to purchase
726,444 of such shares of our Common Stock were vested
as of such date and, upon exercise, these shares will be eligible
for sale subject to the lock–up agreements described below
and Rules 144 and 701 under the Securities Act.
Lock-Up Agreements
We, along with our directors, executive officers
and our 2%
or greater stockholders have agreed
with the underwriters that for a period of 180 days, after the date
of this prospectus, subject to specified exceptions as detailed
further in “Underwriting” below, we or they will not
offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any
option, or otherwise dispose of or transfer any shares of our
Common Stock or any securities convertible into or exercisable or
exchangeable for shares of our Common Stock, request or demand that
we file a registration statement related to our Common Stock or
enter into any swap or other agreement that transfers to another,
in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock.
Upon expiration of
the lock-up period, certain of our stockholders will have
the right to require us to register their shares under the
Securities Act. See “—Registration Rights”
below.
Upon the expiration of
the lock-up period, substantially all of the shares
subject to such lock-up restrictions will become eligible
for sale, subject to the limitations discussed above.
Market Information
There is no established
public trading market in our common stock. Our securities are not
listed for trading on any national securities exchange nor are bid
or asked quotations reported in any over-the-counter quotation
service. We have applied to list our common stock on the Nasdaq
Capital Market under the ticker “MNPR”. No assurance
can be given that our application will be approved.
Rule 144 Eligibility
As of November
4, 2019, 9,291,421 shares of our common stock are eligible
for sale under Rule 144.
We cannot estimate the number
of shares of our common stock that our existing stockholders will
elect to sell under Rule 144.
Holders
As of November 4, 2019,
there were 9,291,421 shares of our common stock outstanding held by
43 holders. In addition, there were 11 holders of stock options to
purchase up to 1,105,896 shares of our common stock.
Dividends
We have never paid cash
dividends on any of our capital stock and we currently intend to
retain our future earnings, if any, to fund the development and
growth of our business. We do not intend to pay cash dividends to
holders of our common stock in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table provides
information as of June 30, 2019, with respect to shares of our
common stock that may be issued under existing equity compensation
plans. All of our equity compensation plans have been approved by
our security holders.
Plan
Category
|
Number of Securities to be Issued Upon Exercise of Outstanding
Options, Warrants and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants
and Rights
|
Number of Securities Remaining Available For Future Issuance under
Equity Compensation Plans
|
Equity compensation
plans approved by security holders (1)
|
1,105,896
|
$2.99
|
494,104
|
(1) The
Monopar Therapeutics Inc. 2016 Stock Incentive Plan.
Registration Rights
We are subject to an
agreement with TacticGem (pursuant to the Gem Transaction as
discussed later in this document), which obligates us to file Form
S-3 or other appropriate form of registration statement covering
the resale of any of our common stock by TacticGem, Gem, or Tactic,
upon direction by TacticGem at any time after we have been subject
to the reporting requirements of the 1934 Act for at least twelve
months (the “Initial Holding Period”). We are required
to use our best efforts to have such registration statement
declared effective as soon as practical after it is filed. In the
event that such registration statement for resale is not approved
by the SEC, and TacticGem submits a written request, we are
required to prepare and file a registration statement on Form S-1
registering such common stock for resale and to use our best
efforts to have such registration statement declared effective as
soon as practical thereafter. After registration, pursuant to these
rights, these shares will become freely tradable without
restriction under the Securities Act other than pursuant to
restrictions on affiliates under Rule 144.
MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES TO NON-U.S. HOLDERS OF
OUR
COMMON STOCK
The
following is a summary of the material U.S. federal income tax
consequences to non-U.S. holders (as defined below) of
the acquisition, ownership and disposition of our common stock
issued pursuant to this offering. This discussion is not a complete
analysis of all potential U.S. federal income tax consequences
relating thereto, does not address the potential application of the
Medicare contribution tax on net investment income, and does not
address any estate or gift tax consequences or any tax consequences
arising under any state, local or foreign tax laws, or any other
U.S. federal tax laws. This discussion is based on the U.S.
Internal Revenue Code of 1986, as amended, or Code, Treasury
Regulations promulgated thereunder, judicial decisions and
published rulings and administrative pronouncements of the Internal
Revenue Service (“IRS”) all as in effect as of the date
of this prospectus. These authorities are subject to differing
interpretations and may change, possibly retroactively, resulting
in U.S. federal income tax consequences different from those
discussed below. We have not requested a ruling from the IRS with
respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the IRS or a
court will agree with such statements and
conclusions.
This
discussion is limited to non-U.S. holders who purchase
our common stock pursuant to this offering and who hold our common
stock as a “capital asset” within the meaning of
Section 1221 of the Code (generally, property held for
investment). This discussion does not address all of the U.S.
federal income tax consequences that may be relevant to a
particular holder in light of such holder’s particular
circumstances. This discussion also does not consider any specific
facts or circumstances that may be relevant to holders subject to
special rules under the U.S. federal income tax laws, including,
without limitation:
●
certain former
citizens or long-term residents of the United States;
●
partnerships or
other pass-through entities (and investors
therein);
●
“controlled foreign
corporations”;
●
“passive
foreign investment companies”;
●
corporations that
accumulate earnings to avoid U.S. federal income tax;
●
banks, financial
institutions, investment funds, insurance companies, brokers,
dealers or traders in securities;
●
tax-exempt organizations
and governmental organizations;
●
tax-qualified retirement
plans;
●
persons subject to
the alternative minimum tax;
●
persons who hold or
receive our common stock pursuant to the exercise of any employee
stock option or otherwise as compensation;
●
persons that own,
or have owned, actually or constructively, more than 5% of our
common stock;
●
persons who have
elected to mark securities to market; and
●
persons holding our
common stock as part of a hedging or conversion transaction or
straddle, or a constructive sale, or other risk reduction strategy
or integrated investment.
If an entity or arrangement
that is classified as a partnership for U.S. federal income tax
purposes holds our common stock, the U.S. federal income tax
treatment of a partner in the partnership will generally depend on
the status of the partner and the activities of the partnership.
Partnerships holding our common stock and the partners in such
partnerships are urged to consult their tax advisors about the
particular U.S. federal income tax consequences to them of holding
and disposing of our common stock.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF
ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY
TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS
AND ANY OTHER U.S. FEDERAL TAX LAWS. IN ADDITION, SIGNIFICANT
CHANGES IN U.S. FEDERAL TAX LAWS WERE RECENTLY ENACTED. PROSPECTIVE
INVESTORS SHOULD ALSO CONSULT WITH THEIR TAX ADVISORS WITH RESPECT
TO SUCH CHANGES IN U.S. TAX LAW AS WELL AS POTENTIAL CONFORMING
CHANGES IN STATE TAX LAWS.
Definition of Non-U.S. Holder
For
purposes of this discussion, a non-U.S. holder is any
beneficial owner of our common stock that is not a “U.S.
person” or a partnership (including any entity or arrangement
treated as a partnership) for U.S. federal income tax purposes. A
U.S. person is any person that, for U.S. federal income tax
purposes, is or is treated as any of the
following:
●
an individual who
is a citizen or resident of the U.S.;
●
a corporation (or
entity treated as a corporation for U.S. federal income tax
purposes) created or organized under the laws of the U.S., any
state thereof or the District of Columbia;
●
an estate, the
income of which is subject to U.S. federal income tax regardless of
its source; or
●
a trust
(1) whose administration is subject to the primary supervision
of a U.S. court and which has one or more U.S. persons who have the
authority to control all substantial decisions of the trust or
(2) that has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S.
person.
Distributions on Our Common Stock
As described under the
section titled “Dividend Policy,” we have not paid and
do not anticipate paying dividends. However, if we make cash or
other property distributions on our common stock, such
distributions will constitute dividends for U.S. federal income tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. federal income tax
principles. Amounts that exceed such current and accumulated
earnings and profits and, therefore, are not treated as dividends
for U.S. federal income tax purposes will constitute a return of
capital and will first be applied against and reduce a
holder’s tax basis in our common stock, but not below zero.
Any excess will be treated as gain realized on the sale or other
disposition of our common stock and will be treated as described
under the section titled “—Gain On Disposition of Our
Common Stock” below.
Subject to the discussion
below regarding effectively connected income, backup withholding
and Sections 1471 through 1474 of the Code (commonly referred to as
FATCA), dividends paid to a non-U.S. holder of our common
stock generally will be subject to U.S. federal withholding tax at
a rate of 30% of the gross amount of the dividends or such lower
rate specified by an applicable income tax treaty. To receive the
benefit of a reduced treaty rate, a non-U.S. holder must
furnish us or our withholding agent a valid IRS
Form W-8BEN or IRS Form W-8BEN-E (or applicable
successor form) including a taxpayer identification number and
certifying such holder’s qualification for the reduced rate.
This certification must be provided to us or our withholding agent
before the payment of dividends and must be updated periodically.
If the non-U.S. holder holds the stock through a
financial institution or other agent acting on
the non-U.S. holder’s behalf,
the non-U.S. holder will be required to provide
appropriate documentation to the agent, which then will be required
to provide certification to us or our withholding agent, either
directly or through other intermediaries.
Non-U.S. holders that do
not provide the required certification on a timely basis, but that
qualify for a reduced treaty rate, may obtain a refund of any
excess amounts withheld by timely filing an appropriate claim for
refund with the IRS.
If
a non-U.S. holder holds our common stock in connection
with the conduct of a trade or business in the U.S., and dividends
paid on our common stock are effectively connected with such
holder’s U.S. trade or business (and are attributable to such
holder’s permanent establishment in the U.S. if required by
an applicable tax treaty), the non-U.S. holder will be
exempt from U.S. federal withholding tax. To claim the exemption,
the non-U.S. holder must generally furnish a valid IRS
Form W-8ECI (or applicable successor form) to the
applicable withholding agent.
However, any such effectively
connected dividends paid on our common stock generally will be
subject to U.S. federal income tax on a net income basis at the
regular graduated U.S. federal income tax rates in the same manner
as if such holder were a resident of the U.S.
A non-U.S. holder that is a foreign corporation also may
be subject to an additional branch profits tax equal to 30% (or
such lower rate specified by an applicable income tax treaty) of
its effectively connected earnings and profits for the taxable
year, as adjusted for certain items. Non-U.S. holders
should consult their tax advisors regarding any applicable income
tax treaties that may provide for different
rules.
Effectively Connected Income
If a non-U.S. holder is
engaged in a U.S. trade or business and dividends on, or any gain
recognized upon the disposition of, our common stock is effectively
connected with the conduct of that U.S. trade or business, then
such non-U.S. Holder would be subject to U.S. federal income tax on
that dividend or gain on a net income basis in the same manner as
if the non-U.S. Holder were a “United States person”
(as defined under Section 7701(a)(30) the Code) unless an
applicable income tax treaty provides otherwise. In that case, such
non-U.S. Holder generally would be exempt from the U.S. federal
withholding tax discussed above on dividends, although the non-
U.S. Holder generally would be required to provide a properly
executed applicable IRS Form W-8 in order to claim such exemption.
In addition, if the non-U.S. Holder is a corporation, it generally
would be subject to a “branch profits tax” at a rate of
30% (or an applicable lower treaty rate) on its effectively
connected earnings and profits attributable to such dividend or
gain (subject to certain adjustments). Non-U.S. holders should
consult their tax advisors regarding any applicable tax treaties
that may provide for different rules.
Gain on Disposition of Our Common Stock
Subject to the discussion
below regarding backup withholding and FATCA,
a non-U.S. holder generally will not be subject to U.S.
federal income tax on any gain realized on the sale or other
disposition of our common stock, unless:
●
the gain is
effectively connected with the non-U.S. holder’s
conduct of a trade or business in the U.S., and if required by an
applicable income tax treaty, is attributable to a permanent
establishment maintained by the non-U.S. holder in the
U.S.; or
●
the non-U.S. holder
is a nonresident alien individual present in the U.S. for 183 days
or more during the taxable year of the disposition, and certain
other requirements are met; or
●
our common stock
constitutes a “United States real property interest”
(“USRPI”) by reason of our status as a “United
States real property holding corporation”
(“USRPHC”) for U.S. federal income tax purposes at any
time during the shorter of (i) the five-year period ending on the
non-U.S. holder’s date of disposition and (ii) the period
that the non-U.S. holder held our common stock.
Generally, a corporation is a
USRPC if the fair market value of its USRPIs equals or exceeds 50%
of the sum of the fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or
business (all as determined for U.S. federal income tax purposes).
With respect to the third bullet point above, we believe we
currently are not, and will not become, a USRPHC for U.S. federal
income tax purposes, and the remainder of this discussion assumes
this is the case. However, because the determination of whether we
are a USRPHC depends on the fair market value of our USRPIs
relative to the fair market value of our other business assets,
there can be no assurance we will not become a USRPHC in the
future. Even if we are or were to become a USRPHC, as long as our
common stock is “regularly traded,” as defined by
applicable Treasury Regulations, on an established securities
market, such common stock will be treated as USRPIs only if a
non-U.S. holder actually or constructively holds more than 5% or
less of our common stock during the shorter of (i) the five-year
period ending on the date of the sale or other taxable disposition
and (ii) the non-U.S. holder’s holding period. No assurance
can be provided that our common stock will be regularly traded on
an established securities market at all times for purposes of the
rules described above.
If you are a non-U.S. holder
described in the first bullet above, you will generally be required
to pay tax on the net gain derived from the disposition under
regular graduated U.S. federal income tax rates, and
a non-U.S. holder that is a foreign corporation also may
be subject to an additional branch profits tax equal to 30% (or
such lower rate specified by an applicable income tax treaty) If
you are a non-U.S. holder described in the second bullet point
above, you will generally be required to pay a flat 30% tax (or
such lower rate specified by an applicable income tax treaty) on
the gain derived from the disposition, which gain may be offset by
certain U.S.-source capital losses provided that the you have
timely filed U.S. federal income tax returns with respect to such
losses. Non-U.S. holders should consult their tax
advisors regarding any applicable income tax treaties that may
provide for different rules.
Information Reporting and Backup Withholding
Annual reports are required
to be filed with the IRS and provided to
each non-U.S. holder indicating the amount of dividends
on our common stock paid to such holder and the amount of any tax
withheld with respect to those dividends. These information
reporting requirements apply even if no withholding was required
because the dividends were effectively connected with the
holder’s conduct of a U.S. trade or business, or withholding
was reduced or eliminated by an applicable income tax treaty. This
information also may be made available under a specific treaty or
agreement with the tax authorities in the country in which
the non-U.S. holder resides or is established. Backup
withholding, currently at a 24% rate, generally will not apply to
payments to a non-U.S. holder of dividends on or the
gross proceeds of a disposition of our common stock provided
the non-U.S. holder furnishes the required certification
for its non-U.S. status, such as by providing a valid IRS
Form W-8BEN, IRS Form W-8BEN-E or IRS
Form W-8ECI (or applicable successor form), or certain
other requirements are met. Backup withholding may apply if the
payor has actual knowledge, or reason to know, that the holder is a
U.S. person who is not an exempt recipient.
Backup withholding is not an
additional tax. If any amount is withheld under the backup
withholding rules, the non-U.S. holder should consult
with a U.S. tax advisor regarding the possibility of and procedure
for obtaining a refund or a credit against
the non-U.S. holder’s U.S. federal income tax
liability, if any.
Withholding on Foreign Entities
FATCA imposes a U.S. federal
withholding tax of 30% on certain payments made to a “foreign
financial institution” (as specially defined under these
rules) unless such institution enters into an agreement with the
U.S. government to withhold on certain payments and to collect and
provide to the U.S. tax authorities substantial information
regarding certain U.S. account holders of such institution (which
includes certain equity and debt holders of such institution, as
well as certain account holders that are foreign entities with U.S.
owners) or an exemption applies. FATCA also generally will impose a
U.S. federal withholding tax of 30% on certain payments made to
a non-financial foreign entity unless such entity
provides the withholding agent a certification identifying certain
direct and indirect U.S. owners of the entity or an exemption
applies. An intergovernmental agreement between the U.S. and an
applicable foreign country may modify these requirements. Under
certain circumstances, a non-U.S. holder might be
eligible for refunds or credits of such taxes. FATCA currently
applies to dividends paid on our common stock. FATCA will also
apply to gross proceeds from sales or other dispositions of our
common stock after December 31, 2018.
Prospective investors are
encouraged to consult with their own tax advisors regarding the
possible implications of FATCA on their investment in our common
stock.
The
Members of our Board, each of whom serves until the next annual
meeting of stockholders, and the executive officers of the Company,
each of whom serves at the discretion of our Board are as
follows:
|
|
|
|
Christopher
M. Starr, PhD
|
67
|
Executive
Chairman, Director
|
|
|
Chandler
D. Robinson, MD MBA MSc
|
35
|
Chief
Executive Officer, Director
|
|
|
Andrew
P. Mazar, PhD
|
57
|
Executive
Vice President of Research and Development, Chief Scientific
Officer, Director
|
|
Kim
R. Tsuchimoto
|
56
|
Chief
Financial Officer
|
|
Patrice
Rioux, MD, PhD
|
68
|
Acting
Chief Medical Officer
|
|
Raymond
W. Anderson, MBA
|
77
|
Director,
Chair of the Audit Committee, Chair of the Compensation Committee
and Member of the Corporate Governance and Nominating
Committee
|
|
Michael
J. Brown, MSc
|
62
|
Director,
Member of the Audit Committee, Member of the Compensation
Committee, Member of the Corporate Governance and Nominating
Committee
|
|
Arthur
J. Klausner, MBA
|
59
|
Director,
Chair of the Corporate Governance and Nominating Committee, Member
of the Audit Committee, Member of the Compensation
Committee
|
|
Backgrounds of our
executive officers and Board Members are discussed
below.
Executive Officers and Board Members
Christopher M. Starr, PhD - Executive Chairman and Board
Member
Dr.
Starr is a co-founder and has been our Executive Chairman and a
Board Member of ours and our predecessor, Monopar Therapeutics,
LLC, since its inception in December 2014. Dr. Starr was the
co-founder and served as the chief executive officer
(“CEO”) at Raptor Pharmaceuticals
(“Raptor”) (Nasdaq: RPTP), since its inception in 2006
through December 2014 and continued to serve Raptor as a member of
its board of directors until Raptor was sold to Horizon Pharma plc
in October 2016. The principal business of Raptor was the
development and commercialization of treatments for rare diseases.
Dr. Starr was also a co-founder of BioMarin Pharmaceutical
(“BioMarin”) (Nasdaq: BMRN) in 1997 where he last
served as Vice President of Research and Development until 2006.
BioMarin is a fully-integrated multinational biopharmaceutical
company. Dr. Starr earned a B.S. from Syracuse University and a
Ph.D. in Biochemistry and Molecular Biology from the State
University of New York Health Science Center, in Syracuse, New
York.
Dr.
Starr’s board qualifications include over 25 years of
executive experience in funding and operating biopharma companies,
including public companies in the biopharmaceutical industry. We
believe Dr. Starr’s experience qualifies him to serve as the
executive chairman of our Board.
Chandler D. Robinson, MD MBA MSc - Chief Executive Officer and
Board Member
Dr.
Robinson is a co-founder and has been our CEO and a Board Member of
ours and our predecessor, Monopar Therapeutics, LLC, since its
inception in December 2014. Since 2010, Dr. Robinson has been, and
continues to be, a manager of Tactic Pharma, which he co-founded
and led as CEO until it became a holding company in April 2014.
Tactic Pharma acquired and developed preclinical and clinical stage
biopharmaceutical compounds. From 2009 to 2010 Dr. Robinson
conducted research at Northwestern University on a drug candidate
currently being developed to treat Wilson’s disease, which
was acquired by Tactic Pharma in 2010 and sold in 2014. Among his
previous experiences, Dr. Robinson in 2008 worked at Onyx
Pharmaceuticals, an oncology biopharmaceutical company, in their
Nexavar marketing division, from 2008 to 2009 as a co-manager of a
healthcare clinic in San Jose CA, from 2004 to present as Founder
and President of an undergraduate research focused non-profit now
in its 15th year, and from 2006 to 2007 as part of a quantitative
internal hedge-fund style team at Bear Stearns investment bank. He
was previously on the board of Wilson Therapeutics (acquired by
Alexion Pharmaceuticals Inc.), a biopharmaceutical company, and is
currently on the board of Northwestern University’s Chemistry
of Life Processes Institute. Dr. Robinson graduated summa cum laude
from Northwestern University, earned a master’s degree in
International Health Policy and Health Economics from the London
School of Economics on a Fulbright Scholarship, an MBA from
Cambridge University on a Gates Scholarship through Bill
Gates’ Trust, and an MD from Stanford
University.
Dr.
Robinson’s extensive leadership and management experience
along with his medical and business degrees and his entrepreneurial
and strategic vision and knowledge of Monopar’s product
candidates and operations led to the conclusion that he should
serve as a member of our Board.
Andrew P. Mazar, PhD – Executive Vice President of Research
and Development, Chief Scientific Officer and Board
Member
Dr.
Mazar is a co-founder and has been our Chief Scientific Officer and
a Board Member of ours and our predecessor, Monopar Therapeutics,
LLC, since its inception in December 2014. Dr. Mazar became our
Executive Vice President of Research and Development effective as
of November 1, 2017. Dr. Mazar has founded or co-founded eight
start-up companies to commercialize new drug discoveries, including
Tactic Pharma, formerly a biopharmaceutical company, where he
worked since 2010, and which acquired and developed preclinical and
clinical stage compounds. Dr. Mazar has founded or advised several
start-up companies over the past five years including Tactic
Pharma, Valence Therapeutics (a biopharmaceutical company), Wilson
Therapeutics (a biopharmaceutical company), Panther Biotechnology
(a biopharmaceutical company), Lung Therapeutics Inc. (a
biopharmaceutical company), Actuate Therapeutics (an oncology
biopharmaceutical company), AvidTox (a biopharmaceutical company)
and Tempus (a biopharmaceutical company). Prior to joining Tactic
Pharma in 2010 and the Chemistry of Life Processes Institute at
Northwestern University in 2009, Dr. Mazar was the Chief Scientific
Officer at Attenuon, LLC, a biopharmaceutical company in San Diego
from 2000 to 2009. Dr. Mazar is the previous Chair of the National
Cancer Institute Nanotechnology Alliance Animal Model working group
(2011-2015) and has been a member of the National Heart, Lung and
Blood Institute Scientific Review Board (SRB) for the SMARTT
program since 2011. Dr. Mazar is currently a member of the
editorial board of Clinical Cancer Research and the External
Advisory Board for NewCures at Northwestern University. Dr. Mazar
earned a Ph.D. in biochemistry at the University of Illinois
College of Medicine.
Dr.
Mazar’s extensive experience in leadership positions in the
biopharmaceutical industry led to the conclusion that he should
serve as a member of our Board.
Kim R. Tsuchimoto – Chief Financial Officer
Ms.
Tsuchimoto has been our Chief Financial Officer since June 2015.
Ms. Tsuchimoto spent over nine years at Raptor, a biopharmaceutical
company, as its Chief Financial Officer from Raptor’s
inception in May 2006 until September 2012, as Raptor’s Vice
President of International Finance, Tax & Treasury from
September 2012 to February 2015, and lastly as Raptor’s Vice
President, Financial Planning & Analysis and Internal Controls
from February to May 2015. Prior to Raptor, Ms. Tsuchimoto spent
eight years at BioMarin, a biopharmaceutical company, and its
predecessor, Glyko, Inc., where she held the positions of Vice
President-Treasurer, Vice President-Controller and Controller. Ms.
Tsuchimoto received a B.S. in Business Administration from San
Francisco State University. She holds an inactive California
Certified Public Accountant license.
Patrice Rioux, MD Ph.D. – Acting Chief Medical
Officer
Dr.
Rioux has been our Acting Chief Medical Officer since December
2016. Dr. Rioux has been performing development,
medical/regulatory, and clinical consulting services through his
consulting company, pRx Consulting, LLC from June 2004 to the
present. Dr. Rioux received his medical education at Faculté
de Médecine Pitié-Salpetriere, his Ph.D. in Mathematical
Statistics at Faculté des Sciences, and his Degree of
Pharmacology (pharmacokinetics and clinical pharmacology) at
Faculté de Médecine Pitié-Salpetriere.
Michael J. Brown, MSc – Board Member
Mr.
Brown has been a Board Member of ours and our predecessor, Monopar
Therapeutics, LLC since its inception in December 2014. Since 1994,
Mr. Brown has served as Chairman, and since 1996 as CEO, of Euronet
Worldwide Inc. (“Euronet”) (Nasdaq: EEFT) which offers
payment and transaction processing and distribution solutions to
financial institutions, retailers, service providers and individual
consumers. Mr. Brown has been President of Euronet since December
2014. Mr. Brown has also served on the boards of Euronet’s
predecessor companies. He has an M.S. in molecular and cellular
biology.
Mr.
Brown’s extensive leadership and management experience,
including strategic planning, business development, and financing
strategies led to the conclusion that he should serve as a member
of our Board.
Raymond W. Anderson, MBA, MS – Board Member
Mr.
Anderson has been a Board Member of Monopar since April 2017. Mr.
Anderson served as a board member and chair of the audit committee
at Raptor, a biopharmaceutical company, from its founding in 2006
to its acquisition in 2016. Mr. Anderson worked at Dow
Pharmaceutical Sciences, Inc., a topical drug formulation company,
from July 2003 until he retired in June 2010. He most recently
served as Dow’s Managing Director from January 2009 to June
2010, and previously served as Dow’s Chief Financial Officer
and Vice President, Finance and Administration. Prior to joining
Dow in 2003, Mr. Anderson was Chief Financial Officer for
Transurgical, Inc., a private medical technology company. Prior to
that, Mr. Anderson served as Chief Operating Officer and Chief
Financial Officer at BioMarin, a biopharmaceutical company, from
June 1998 to January 2002. Mr. Anderson holds an M.B.A. from
Harvard University, an M.S. in administration from George
Washington University and a B.S. in engineering from the U.S.
Military Academy.
Mr.
Anderson’s background and experience as a finance executive
in the biopharmaceutical industry and his qualification as an
“audit committee financial expert” under SEC and Nasdaq
rules led to the conclusion that he should serve as a member of our
Board.
Arthur J. Klausner, MBA – Board Member
Mr.
Klausner has been a Board Member of Monopar since August 2017.
Since 2018 Mr. Klausner has served as President, CEO, and a
Director of the start-up drug development company Goldilocks
Therapeutics, Inc. Mr. Klausner has been a consultant to the
biopharmaceutical industry since 2009. He served as Chief Executive
Officer of Gem from September 2012 until Gem’s drug
development assets were acquired by us in 2017. In addition to his
role at Gem, Mr. Klausner served as CEO of Jade Therapeutics Inc.
(“Jade”) from September 2012 until December 2015.
Jade’s focus was on the development of proprietary,
cross-linked hyaluronic acid formulations for ophthalmic
applications until its March 2016 acquisition by EyeGate
Pharmaceuticals, Inc. (Nasdaq: EYEG). Previously, Mr. Klausner
spent a total of 18 years at the life science venture capital firms
Domain Associates and Pappas Ventures. Mr. Klausner currently
serves on the board of directors of Cennerv Pharma (S) Pte. Ltd.
(Singapore), and on the life science investment review board for
the New York University Innovation Venture Fund. He received his
M.B.A. from the Stanford University Graduate School of Business and
his B.A. in biology from Princeton University.
Mr.
Klausner’s extensive leadership and management experience in
the biopharmaceutical industry led to the conclusion that he should
serve as a member of our Board.
Agreement Regarding Election of Directors
The
limited liability company agreement of TacticGem provides that the
Manager of TacticGem is required to vote TacticGem’s shares
of our common stock to elect Tactic Pharma’s nominees plus
one person designated by Gem to our Board. The Gem board nomination
right terminates at such time as we achieve a listing on a national
stock exchange. Gem’s initial designee for election to our
Board is Arthur J. Klausner.
Board Composition and Election of Directors
Independence of the Board
We
believe it is important to have independent directors on our Board
who can make decisions without being influenced by personal
interests. Additionally, because one of our goals is to qualify for
listing with Nasdaq, we are following the Nasdaq listing standards,
which requires that a majority of the members of our Board must
qualify as “independent,” as affirmatively determined
by our Board. Our Board consults with our counsel to ensure that
our Board’s determinations are consistent with relevant
securities and other laws and regulations regarding the definition
of “independent,” including those set forth in
pertinent listing standards of Nasdaq, as in effect from time to
time.
Consistent
with these considerations, after review of all relevant identified
transactions or relationships between each director, or any of his
family members, and us, our senior management and our independent
registered public accounting firm, our Board has affirmatively
determined that the following directors are independent directors
within the meaning of the applicable Nasdaq listing standards: Dr.
Starr, Mr. Brown, Mr. Anderson and Mr. Klausner. In making this
determination, our Board found that none of the directors had a
material or other disqualifying relationship with us. Dr. Robinson,
our President and Chief Executive Officer, is not an independent
director by virtue of his employment relationship with us, and
similarly Dr. Mazar by virtue of his employment relationship with
us is not an independent director.
There
are no family relationships among any of our directors or executive
officers.
Board
Leadership Structure and Risk Oversight
We have
structured our Board in a way that we believe effectively serves
our objectives of corporate governance and management oversight. We
separate the roles of Chief Executive Officer and Executive
Chairman of the Board in recognition of the differences between the
two roles. We believe that the Chief Executive Officer should be
responsible for Monopar’s day-to-day leadership and
performance, while our Executive Chairman of the Board should work
with our Chief Executive Officer and the rest of our Board to help
set our strategic direction and provide guidance to, and oversight
of our Chief Executive Officer. Our Executive Chairman sets the
agenda for Board meetings and presides over them.
Pursuant to our
Audit Committee Charter, which was approved by our Board on March
22, 2018 and amended on December 4, 2018, our Audit Committee is
responsible for the oversight of our risk management programs, and
specifically:
●
Risk assessment and
risk management. The Audit Committee shall review (at least
annually or as needed due to specific circumstances) with the
Company’s management and the independent registered public
accounting firm the Company’s policies, procedures and
current status with respect to risk assessment and risk management
including steps taken by management to monitor, mitigate and manage
risk exposures; and
●
The Audit Committee
review shall also include the Company’s major financial risk
exposures and other major risk exposures as assigned by the Board
to the Audit Committee for oversight. The Audit Committee shall
review with the Company’s senior management our overall
anti-fraud programs and controls. The Audit Committee shall
consider the risk of the Company’s management’s ability
to override the Company’s internal controls.
Audit Committee
Our
Board formed an Audit Committee in October 2017 and appointed Mr.
Anderson, Dr. Starr, Mr. Klausner and Mr. Brown to serve as
independent members. Mr. Anderson was appointed to serve as chair
of the Audit Committee. Mr. Anderson is a financial expert as
defined by Nasdaq and the SEC and is an independent board member as
contemplated by Rule 10A-3 under the Exchange Act. Dr. Starr served on the Audit Committee until
August 2018.
The
functions of our Audit Committee include, among other duties and
responsibilities:
●
to assist the Board
in its oversight responsibilities for the integrity of the
Company’s financial statements;
●
to assure the
quality of the accounting and financial reporting processes of the
Company;
●
to assure the
effectiveness of the Company’s internal controls over
financial reporting;
●
to assist with the
Company’s compliance with legal and regulatory
requirements;
●
to review and
discuss with management and the independent registered public
accounting firm the Company’s annual and quarterly SEC
reports including the audit of the annual financial statements and
the reviews of the quarterly financial statements and related
disclosures;
●
to be directly
responsible for the appointment, compensation, retention, and
oversight of the work of the independent registered public
accounting firm and any other independent registered public
accounting firm performing other audit, review, or attest services
for the Company;
●
to review and
discuss with the Company’s management the risk assessment and
risk management policies of the Company;
●
to oversee systems
and procedures for the receipt, retention and resolution of
complaints received by the Company regarding accounting, internal
financial controls or auditing matters and for the confidential and
anonymous submission by Company employees of concerns regarding
potential fraud or questionable financial, accounting, internal
financial controls or auditing matters;
●
to periodically
review and update the financial-related sections of the
Company’s Code of Business Conduct and Ethics and review
programs established to monitor compliance with and to improve
employees’ knowledge of the Code;
●
to review and
approve or disapprove any transaction required to be disclosed
according to SEC regulations between the Company and any related
party and to oversee the Company’s policies and procedures
for judgments as to related party transactions; and
●
to prepare the
Audit Committee’s report required by SEC rules, when such
requirement becomes applicable to the Company.
The
Audit Committee is governed by a written charter adopted by the
Board in May 2018 and updated in December 2018. The Audit Committee
Charter can be found in the Corporate Governance section of the
Investors section of our website at www.monopartx.com.
Information on our website is NOT incorporated by reference in this
prospectus. The Audit Committee Charter complies with the
guidelines established by Nasdaq.
As
required by its Charter, the Audit Committee conducts a
self-evaluation at least annually. The Audit Committee also
periodically reviews and assesses the adequacy of its Charter,
including the Audit Committee’s role and responsibilities,
and recommends any proposed changes to the Board for its
consideration.
Corporate Governance and Nominating Committee
Our
Board formed a Corporate Governance and Nominating
(“CG&N”) Committee in October 2017 and appointed
Mr. Brown, Dr. Starr, Mr. Anderson and Mr. Klausner as independent
members. Mr. Klausner was appointed to serve as the chair of the
CG&N Committee in August 2018. Dr. Starr served on the CG&N
Committee until August 2018.
The
functions of our corporate governance and nominating committee
include, among other things:
●
overseeing
the composition of the Board to ensure that qualified individuals
meeting the criteria of applicable rules and regulations serve as
members of the Board and its committees;
●
identifying,
reviewing and evaluating individuals qualified to serve on the
Board consistent with criteria approved by the Board as vacancies
arise, and seeking out nominees to enhance the diversity, expertise
and independence of the Board;
●
considering
and assessing the independence of directors, including whether a
majority of the Board continue to be independent from management in
both fact and appearance, as well as within the meaning prescribed
by the listing standards of Nasdaq;
●
recommending
to our Board the persons to be nominated for election as directors
and to each of the Board's committees;
●
considering
proposals appropriately submitted by our stockholders;
●
reviewing
and making recommendations to the Board with respect to management
succession planning;
●
developing
and recommending to the Board corporate governance guidelines;
and
●
overseeing
an annual evaluation of the Board.
The
CG&N Committee is governed by a written charter adopted by the
Board in May 2018. The CG&N Committee Charter can be found in
the Corporate Governance section of the Investors section of our
website at www.monopartx.com. Information on our website is
NOT incorporated by reference in this prospectus. The CG&N
Committee Charter complies with the guidelines established by
Nasdaq. The Charter of the CG&N Committee grants the CG&N
Committee full access to all of our books, records, facilities and
personnel, as well as authority to obtain, at our expense, advice
and assistance from internal and external legal, accounting or
other advisors and consultants and other external resources that
the CG&N Committee considers necessary or appropriate in the
performance of its duties.
As
required by its Charter, the CG&N Committee conducts a
self-evaluation at least annually. The CG&N Committee also
periodically reviews and assesses the adequacy of its Charter,
including the CG&N Committee’s role and responsibilities,
and recommends any proposed changes to the Board for its
consideration.
Compensation Committee
Our
Board also formed a Compensation Committee in October 2017 and
appointed Mr. Brown, Dr. Starr, Mr. Anderson and Mr. Klausner as
independent members. Mr. Anderson was appointed to serve as the
chair of the Compensation Committee in August 2018. Dr. Starr served on the Compensation Committee
until August 2018.
During
the year ended December 31, 2018, the Compensation Committee did
not engage an independent third-party compensation
expert.
The
functions of our Compensation Committee include, among other
things:
●
annually reviewing
and approving corporate goals and objectives relevant to our CEO's
compensation;
●
determining our
CEO's compensation;
●
reviewing and
approving, or making recommendations to our Board with respect to,
the compensation of our other executive officers;
●
overseeing an
evaluation of our senior executives;
●
overseeing and
administering our equity incentive plans;
●
reviewing and
making recommendations to our Board with respect to director
compensation; and
●
preparing the
annual Compensation Committee report to the extent required by SEC
rules, when such requirement becomes applicable to us.
The
Compensation Committee is governed by a written charter adopted by
the Board in May 2018. The
Compensation Committee Charter can be found in the Corporate
Governance section of the Investors section of our website
at www.monopartx.com. Information on our website is NOT
incorporated by reference in this prospectus. The Compensation
Committee Charter complies with the guidelines established by
Nasdaq.
As
required by its Charter, the Compensation Committee conducts a
self-evaluation at least annually. The Compensation Committee also
periodically reviews and assesses the adequacy of its Charter,
including the Compensation Committee’s role and
responsibilities, and recommends any proposed changes to the Board
for its consideration.
Plan
Administrator Committee
Our
Board formed a Plan Administrator Committee in February 2018 and
appointed Dr. Starr, Mr. Brown and Mr. Anderson to serve as
independent members. The Plan Administrator Committee does not have
a charter but the functions of the Plan Administrator Committee
include, among other things:
●
appointing
individuals responsible for the day-to-day administration of the
Plan including the issuance and routing of stock option grant
agreements based upon Plan Administrator Committee approved grants
and related recordkeeping and accounting functions;
●
pursuant to the
Plan, granting “performance based” and “time
based” options or stock awards to our directors, officers,
employees and consultants;
●
determining the
number of shares of common stock and the type of awards granted
under the Plan to optionees; and
●
determining
restrictions and terms of awards including modifications or
amendments to awards under the Plan.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and
Ethics that is applicable to our principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions. It also
applies to all of our employees and our non-employee directors. Our
Code of Business Conduct and Ethics is available on our website
at www.monopartx.com
and will be provided to any person
without charge upon request. Information on our website is NOT
incorporated by reference in this prospectus.
Section 16(A) Beneficial Ownership Reporting
Compliance
Under
Section 16(a) of the Exchange Act and SEC rules, our directors,
executive officers and beneficial owners of more than 10% of any
class of equity security are required to file periodic reports of
their ownership, and changes in that ownership, with the SEC. To
our knowledge, based solely on the review of copies of the reports
filed with the SEC and any written representations that no other
reports were required, all reports required to be filed by our
executive officers, directors and beneficial owners of more than
10% of our common stock were timely filed during the year ended
December 31, 2018, except that Forms 4 reporting the grants of
stock options on August 28, 2018 were filed on September 27, 2018
for the following directors and officers: Dr. Robinson, Dr. Mazar,
Dr. Starr, Ms. Tsuchimoto, Mr. Brown, Mr. Anderson and Mr.
Klausner, and the Form 4
reporting the grant of a stock option to Dr. Rioux on December 30,
2018 was filed on January 25, 2019.
EXECUTIVE AND DIRECTOR
COMPENSATION
Summary Compensation Table
The
following table sets forth for the years ended December 31,
2018, 2017 and 2016,
the compensation of our Chief Executive Officer and our two highest compensated executive
officers whose
compensation exceeded $100,000 during our last fiscal year and
our Chief Financial Officer.
|
|
|
|
|
|
All Other Compensation ($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chandler
D. Robinson M.D., Chief Executive Officer and
Director
|
|
|
375,000
|
—
|
640,928
|
55,000
|
1,070,928
|
|
|
|
330,545
|
—
|
46
|
70,000
|
400,591
|
|
|
|
300,000
|
—
|
42
|
75,000
|
375,042
|
|
|
|
|
|
|
|
|
Andrew P. Mazar, Ph.D.(4)
Executive Vice President of Research and Development and
Chief Scientific Officer and
Director
|
|
2018
|
350,000
|
—
|
591,592
|
55,000
|
996,592
|
|
|
2017
|
75,731
|
—
|
46
|
238,750
|
314,527
|
|
|
2016
|
—
|
—
|
42
|
197,500
|
197,542
|
|
|
|
|
|
|
|
|
Kim R. Tsuchimoto(5)
Chief Financial
Officer
|
|
2018
|
125,991
|
—
|
181,046
|
18,000
|
325,037
|
|
|
2017
|
11,370
|
—
|
13
|
50,000
|
61,383
|
|
|
2016
|
—
|
—
|
11
|
79,500
|
79,511
|
|
|
|
|
|
|
|
|
Kirsten Anderson Former Senior Vice President,
Clinical Development(6)
|
|
2018
|
123,000
|
—
|
—
|
80,618
|
203,618
|
|
|
2017
|
43,000
|
25,000
|
132,041
|
78,550
|
278,591
|
|
|
2016
|
—
|
—
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
(1) The
amounts in this column represent the aggregate grant date fair
value of stock options awarded during the applicable year to the
named executive officers, computed in accordance with FASB ASC
Topic 718. The fair value of stock options is estimated on the date
of grant using the Black-Scholes option pricing model for employees
and on each remeasurement date for consultants. For a discussion of
valuation assumptions, see Note 4 to our consolidated financial
statements included in this prospectus.
(2) In
2016, each of Dr. Robinson and Dr. Mazar were granted options to
purchase up to 84,000 shares of our common stock and Ms. Tsuchimoto
was granted options to purchase up to 21,000 shares of our common
stock as discussed below in the section “Outstanding Equity
Awards at Fiscal Year End”. Based upon the Black-Scholes
valuation model for stock option compensation expense, the value of
Dr. Robinson’s and Dr. Mazar’s stock options was
$42 and the value of
Ms. Tsuchimoto’s stock options was $11. The options vested 50% on
the grant date (April 4, 2016), 25% on the six-month anniversary of
the grant date (October 4, 2016) and 25% on the one-year
anniversary of the grant date (April 3, 2017).
In 2017, each of Dr. Robinson and Dr. Mazar was granted options to
purchase up to 84,000 shares of our common stock and Ms. Tsuchimoto
was granted options to purchase up to 23,520 shares of our common
stock as discussed below in the section “Outstanding
Equity Awards at Fiscal Year End”. Based upon the Black-Scholes
valuation model for stock option compensation expense, the value of
Dr. Robinson’s, Dr. Mazar’s and Ms. Tsuchimoto’s
stock options was $46, $46, and $13, respectively. The options
granted to Dr. Robinson, Dr. Mazar and Ms. Tsuchimoto in 2017
vested 6/48ths on the six-month anniversary of grant date (August
20, 2017) and 1/48th per month thereafter.
In 2018, Dr. Robinson, Dr. Mazar and Ms. Tsuchimoto were granted
options to purchase up to 145,500, 134,300 and 41,000 shares of our
common stock, respectively, as discussed below in the
section “Outstanding Equity Awards at Fiscal Year
End”. Based upon the
Black-Scholes valuation model for stock option compensation
expense, the value of Dr. Robinson’s, Dr. Mazar’s and
Ms. Tsuchimoto’s stock options was $640,928, $591,592 and
$181,046, respectively. The options granted in 2018 to Dr.
Robinson, Dr. Mazar and Ms. Tsuchimoto commenced vesting on October
1, 2018 and vested 6/48ths on the six-month anniversary of vesting
commencement date (March 31, 2019) and 1/48th per month
thereafter.
(3) For
2016, All Other Compensation consisted of the following: for Dr.
Robinson, an employer funded 401(k) in the amount of $53,000 plus
$22,000 representing amounts paid in lieu of insurance and other
medical benefits (“Benefits”); for Dr. Mazar $197,500 of consulting
fees earned prior to becoming an employee on November 1, 2017; and
for Ms. Tsuchimoto $79,500 of consulting fees earned prior to
becoming an employee on November 1, 2017.
For
2017, All Other Compensation consisted of the following: for Dr.
Robinson, an employer funded 401(k) in the amount of $54,000 plus
$16,000 in lieu of Benefits; for Dr. Mazar $225,000 of consulting
fees earned prior to becoming an employee on November 1,
2017 plus $13,750 in lieu of Benefits as an
employee; and for Ms.
Tsuchimoto $50,000 of consulting fees earned prior to becoming an
employee on November 1, 2017.
For
2018, All Other Compensation consisted of the following: for Dr.
Robinson, Dr. Mazar and Ms. Tsuchimoto in lieu of Benefits of
$55,000, $55,000 and $18,000, respectively.
(4)
Until November 1, 2017, Dr. Mazar was a consultant acting as chief
scientific officer for $225,000 and $197,500 in
consulting fees in 2017 and
2016, respectively, with no additional compensation for
Board Member services. As of November 1, 2017, Dr. Mazar became
employed as our Executive Vice President of Research and
Development, and Chief Scientific Officer at an annual base salary of $350,000
and an amount in lieu of benefits of $55,000. A pro rata amount of in lieu of
benefits of $13,750 is included in All Other
Compensation.
(5)
Until November 1, 2017, Ms. Tsuchimoto was a consultant acting as
chief financial officer for $50,000 and $79,500 in
consulting fees in 2017 and
2016, respectively. As of November 1, 2017, Ms. Tsuchimoto
became employed as our Chief Financial Officer initially at ¼
of full-time at an annual
base salary of $68,750 and as of March 1, 2018, Ms. Tsuchimoto
commenced working ½ of full time at an annual base salary of
$137,500 and an amount in lieu of Benefits of $21,600.
In 2018, a pro rata amount
of in lieu of Benefits of $18,000 is included in All Other
Compensation.
(6) Until November 1, 2017, Ms. Anderson was a consultant during
2017 providing clinical development strategy for $78,550 in
consulting fees. As of November 1, 2017, Ms. Anderson became
employed as our Senior Vice President, Clinical Development at an
annual base salary of $260,000 and a sign-on bonus of $25,000. On
November 1, 2017, Ms. Anderson was granted options to purchase up
to 40,000 shares of our common stock as discussed below in the
section “Outstanding Equity Awards at Fiscal Year
End”. Based upon the
Black-Scholes valuation model for stock option compensation
expense, the value of Ms. Anderson’s stock options was
$132,041. The options vested 6/48ths on the six-month anniversary
of grant date (May 1, 2018) and 1/48th per month thereafter. As of
June 20, 2018, Ms. Anderson was no longer with the Company, at
which time options to purchase up to 34,167 shares of our common
stock were forfeited and options to purchase up to 5,833 shares of
our common stock expired unexercised on September 20, 2018.
For 2018, All Other Compensation for Ms. Anderson consisted of the
following: $4,818 in lieu of Benefits from April 1, 2018 to June
20, 2018; $65,000 representing three months of base salary
severance; and $10,800 representing six months in lieu of
Benefits.
Employment Agreements
In
December 2016, we entered into an employment agreement with Dr.
Robinson for his role as our chief executive officer. Although we
have been paying Dr. Robinson as our employee since January 1,
2016, we did not enter into a formal employment agreement until
December 2016. Dr. Robinson’s employment agreement is for an
indefinite term (for at-will employment). The agreement was amended
and restated on November 1, 2017.
Under
his employment agreement, Dr. Robinson currently receives a
$375,000 per year base salary, which may be adjusted from time to
time in accordance with normal business practice and in our sole
discretion. In addition, Dr. Robinson will be eligible for an
annual performance bonus, of up to 50% of his base salary, based on
achieving goals as determined by our Board and our Compensation
Committee. Until we obtain retirement and healthcare benefits for
our eligible employees and Dr. Robinson elects to opt in to such
benefits, Dr. Robinson is entitled to other compensation of at
least $4,583.33 per month (or such greater amount as determined by
our Board) in lieu of such benefits. Effective January 1, 2019, the
Board approved a cost of living increase resulting in a new base
salary for Dr. Robinson of $386,250. In March 2019, the Board
awarded to Dr. Robinson a bonus of $7,500 related to 2018
performance.
On
November 1, 2017, we entered into an employment agreement with Dr.
Mazar for his role as our Executive Vice President of Research and
Development and Chief Scientific Officer. Dr. Mazar’s
employment agreement is for an indefinite term (for at-will
employment). Under his employment agreement, Dr. Mazar receives a
$350,000 per year base salary, which may be adjusted from time to
time in accordance with normal business practice and in our sole
discretion. In addition, Dr. Mazar will be eligible for an annual
performance bonus, of up to 40% of his base salary, based on
achieving goals as determined by our Board and our Compensation
Committee. Until we obtain retirement and healthcare benefits for
our eligible employees and Dr. Mazar elects to opt in to such
benefits, Dr. Mazar is entitled to other compensation of at least
$4,583.33 per month (or such greater amount as determined by our
Board) in lieu of such benefits. Effective January 1, 2019, the
Board approved a cost of living increase resulting in a new base
salary for Dr. Mazar of $360,500. In March 2019, the Board awarded
to Dr. Mazar a bonus of $5,600 related to 2018
performance.
On
November 1, 2017, we entered into an employment agreement with Ms.
Tsuchimoto for her role as our Chief Financial Officer. Ms.
Tsuchimoto’s employment agreement is for an indefinite term
(for at-will employment). The agreement was amended on March 1,
2018. Under her employment agreement, Ms. Tsuchimoto receives a
$137,500 per year base salary to reflect 50% time, which may be
adjusted from time to time in accordance with normal business
practice and in our sole discretion. Ms. Tsuchimoto is entitled to
other compensation of $1,800 per month in lieu of medical, dental
and vision benefits until such time the Company has such benefit
plans in place. In addition, Ms. Tsuchimoto will be eligible for an
annual performance bonus determined by our Board and our
Compensation Committee. Effective January 1, 2019, the Board
approved a cost of living increase resulting in a new base salary
for Ms. Tsuchimoto of $141,625. In March 2019, the Board awarded to
Ms. Tsuchimoto a bonus of $2,200 related to 2018
performance.
On
November 1, 2017, we entered into an employment agreement with Ms.
Anderson for her role as our Senior Vice President of Clinical
Development. Ms. Anderson’s employment agreement was for an
indefinite term (for at-will employment). Under her employment
agreement, Ms. Anderson received a $260,000 per year base salary,
which may be adjusted from time to time in accordance with normal
business practice and in our sole discretion. Ms. Anderson's employment agreement
included a $25,000 sign-on bonus. As of June 20, 2018, Ms.
Anderson was no longer with the Company. Pursuant to Ms.
Anderson’s termination agreement, she received a lump sum
representing three months of base salary totaling $65,000 plus six
months of taxable fringe benefits to cover healthcare insurance
totaling $10,800.
Outstanding Equity Awards at Fiscal Year Ended December 31,
2018
The
following table sets forth outstanding stock option awards held by
named executive officers as of December 31, 2018. There were no outstanding
stock awards as of December 31, 2018.
|
Number of securities underlying unexercised options (#)
exercisable
|
|
Number of securities underlying unexercised options (#)
unexercisable
|
|
Option exercise price ($)
|
|
Chandler
D. Robinson, M.D., Chief Executive Officer and
Director
|
—
|
(1)
|
145,500
|
(1)
|
$6.00
|
August
27, 2028
|
|
38,500
|
(2)
|
45,500
|
(2)
|
$0.001
|
February
19, 2027
|
|
84,000
|
(3)
|
—
|
(3)
|
$0.001
|
April
3, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew P. Mazar, Ph.D., Executive Vice
President of Research and Development and Chief Scientific Officer and
Director
|
—
|
(1)
|
134,300
|
(1)
|
$6.00
|
August
27, 2028
|
|
38,500
|
(2)
|
45,500
|
(2)
|
$0.001
|
February
19, 2027
|
|
84,000
|
(3)
|
—
|
(3)
|
$0.001
|
April
3, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kim
R. Tsuchimoto, Chief Financial Officer
|
—
|
(1)
|
41,100
|
(1)
|
$6.00
|
August
27, 2028
|
|
10,780
|
(2)
|
12,740
|
(2)
|
$0.001
|
February
19, 2027
|
|
21,000
|
(3)
|
—
|
(3)
|
$0.001
|
April
3, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirsten
Anderson Former Senior Vice President, Clinical
Development
|
—
|
(4)
|
—
|
(4)
|
N/A
|
N/A
|
(1) Dr. Robinson, Dr. Mazar and Ms. Tsuchimoto were granted stock
option awards on August 28, 2018 which commence vesting on October
1, 2018 and vest 6/51 on the six-month anniversary of vesting
commencement date (March 31, 2019) and 1/51 per month
thereafter.
(2) Dr. Robinson, Dr. Mazar and Ms. Tsuchimoto were granted stock
option awards on February 20, 2017 which vested 6/48ths on the
six-month anniversary of grant date (August 20, 2017) and 1/48th
per month thereafter.
(3)
Dr. Robinson, Dr. Mazar and Ms. Tsuchimoto were granted stock
option awards on April 4, 2016 which vested 50% on the grant date
(April 4, 2016), 25% on the six-month anniversary of the grant date
(October 4, 2016) and 25% on the one year anniversary of the grant
date (April 3, 2017).
(4) On
November 1, 2017, Ms. Anderson was granted options to purchase up
to 40,000 shares of our common stock. As of June 20, 2018, Ms.
Anderson was no longer with the Company, at which time options to
purchase up to 34,167 shares of our common stock were forfeited and
options to purchase up to 5,833 shares of our common stock expired
unexercised on September 20, 2018.
Potential Payments upon Termination or Change in
Control
Each of
Dr. Robinson’s, Dr. Mazar’s and Ms. Tsuchimoto’s
employment agreements provides that upon execution and
effectiveness of a release of claims, Dr. Robinson, Dr. Mazar and
Ms. Tsuchimoto will be entitled to severance payments if their
employment with us terminates under certain circumstances. If we
terminate their employment without “cause,” or if Dr.
Robinson, Dr. Mazar or Ms. Tsuchimoto resigns for “good
reason,” in each case absent a “change in
control,” Dr. Mazar and Dr. Robinson would receive, (1) base
salary continuation for 12 months, (2) to provide that any equity
awards will continue vesting, (3) payment of or reimbursement for
COBRA continuation coverage until the earlier of 12 months
following termination or the date the executive become eligible for
coverage under an employer’s plan and (4) to the extent
allowed by applicable law and the applicable plan documents,
continue to provide all of our employee benefit plans and
arrangements that the employee was receiving at the time of
termination. Ms. Tsuchimoto would receive, (1) base salary
continuation for 3 months, (2) to provide that any equity awards
will continue vesting, (3) if Ms. Tsuchimoto is full-time, payment
of or reimbursement for COBRA continuation coverage until the
earlier of 12 months following termination or the date the
executive become eligible for coverage under an employer’s
plan and (4) to the extent allowed by applicable law and the
applicable plan documents, continue to provide all of our employee
benefit plans and arrangements that the employee was receiving at
the time of termination. In addition, equity awards held by the
terminated employee, that vest solely on the passage of time, will
be accelerated by 12 months.
If Dr.
Robinson’s or Dr. Mazar’s employment is terminated
without cause or for good reason within 12 months following a
change in control, they would be entitled to (1) a lump sum payment
in an amount equal to 1.5 times his respective base salary plus
target annual bonus for the year in which the termination occurs,
(2) payment of or reimbursement for COBRA continuation coverage
until the earlier of 18 months following termination or the date
the executive becomes eligible for coverage under an
employer’s plan and (3) full vesting acceleration of all
outstanding equity awards. If either of Dr. Mazar’s or Dr.
Robinson’s employment is terminated because of death or
permanent disability, we will be obligated to provide base salary
continuation and COBRA payment or reimbursement for a period of
three months.
If Ms.
Tsuchimoto’s employment is terminated without cause or for
good reason within 12 months following a change in control, she
would be entitled to (1) a lump sum payment in an amount equal to
..25 times her base salary plus target annual bonus for the year in
which the termination occurs, (2) if Ms. Tsuchimoto is full-time,
payment of or reimbursement for COBRA continuation coverage until
the earlier of 3 months following termination or the date the
executive becomes eligible for coverage under an employer’s
plan and (3) full vesting acceleration of all outstanding equity
awards. If Ms. Tsuchimoto’s employment is terminated because
of death or permanent disability, we will be obligated to provide
base salary continuation and COBRA payment or reimbursement for a
period of three months.
Upon
any termination of employment, Dr. Robinson, Dr. Mazar and Ms.
Tsuchimoto are entitled to receive any accrued but unpaid base
salary and any earned but unpaid annual bonus.
The
employment agreements with Dr. Robinson, Dr. Mazar and Ms.
Tsuchimoto provide that, in the event that any payments the
executives received in connection with a change in control of our
Company are subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, such payments will be
reduced to the greatest amount payable that would not result in no
such tax owed, but only if it is determined that such reduction
would cause the executive to be better off, on a net after-tax
basis, than without such reduction and payment of the excise tax
under Section 4999 of the Code.
Stock Option Plan
In
April 2016, our Board and stockholders holding more than a majority
of our outstanding convertible preferred stock approved the Monopar
Therapeutics Inc. 2016 Stock Incentive Plan (as subsequently
amended, the “Plan”).
Share Reserve
The
Plan originally allowed us to grant up to an aggregate 10,000
shares of stock awards, stock options, stock appreciation rights
and other stock-based awards to employees, non-employee directors
and consultants. In March 2017, at the time of the conversion of
the then outstanding preferred stock to our common stock and a
concurrent 70-for-1 split of our common stock, the Administrator
effected the 70-for-1 stock split for the Plan which increased the
stock option pool from 10,000 to 700,000 and changed the stock
options granted in 2016 and in February 2017 by a 70-for-1 factor.
No other features were changed on the outstanding stock options
granted.
The
Plan was subsequently amended and restated in October 2017, which
was approved by stockholders holding more than a majority of our
outstanding common stock, in order to increase the maximum
aggregate grants under the Plan from 700,000 to 1,600,000 shares of
stock awards, stock options, stock appreciation rights and other
stock-based awards.
Administration
The
Plan provides that the administrator of the Plan will be our Board,
a committee designated by our Board, or an individual designee (the
“Administrator”). On February 28, 2018, our independent
Directors approved the appointment of a committee (the “Plan
Administrator Committee”) consisting of three independent,
non-employee Directors (Dr. Starr, Mr. Brown, and Mr. Anderson) to
serve as the Administrator of the Plan. The Plan Administrator
Committee will require a quorum of at least two of the three
Directors on all decisions. The Administrator has exclusive
authority, consistent with laws and the terms of the Plan, to
designate recipients of options to be granted thereunder and to
determine the number and type of options and the number of shares
subject thereto. Prior to the formation of the Plan Administrator
Committee, Mr. Brown was the Board-representative Administrator of
the Plan.
Eligibility
Under
the Plan, awards may be granted only to our directors, employees
and consultants or any of our affiliates; provided, however, that
Incentive Stock Options may be granted only to our employees and
employees of our subsidiaries (within the meaning of Section 424(f)
of the Code).
Options
The per
share exercise price for the shares to be issued upon exercise of
an option shall be determined by the Administrator, except that the
per share exercise price shall be no less than 100% of the fair
market value per share on the grant date, except with respect to
conversion awards. Subject to Section 15 of the Plan, the exercise
price of an option may not be reduced without shareholder approval,
nor may outstanding options be cancelled in exchange for cash,
other awards or options with an exercise price that is less than
the exercise price of the original option without shareholder
approval. Options granted under the Plan shall vest and/or be
exercisable at such time and in such installments during the period
prior to the expiration of the option’s term as determined by
the Administrator and as specified in the option agreement. The
Administrator shall have the right to make the timing of the
ability to exercise any option granted under this Plan subject to
continued active employment (or retention in the case of a
consultant or director), the passage of time and/or such
performance requirements as deemed appropriate by the
Administrator. At any time after the grant of an option, the
Administrator may reduce or eliminate any restrictions surrounding
any participant’s right to exercise all or part of the
option. Fair market value is established by our Board, using
third-party valuation reports and recent financings. Stock options
generally expire after ten years.
Stock Appreciation Rights
A Stock
Appreciation Right is a right that entitles the awardee to receive,
in cash or shares (as determined by the Administrator), value equal
to or otherwise based on the excess of (i) the fair market value of
a specified number of shares at the time of exercise over (ii) the
aggregate exercise price of the right, as established by the
Administrator on the grant date. Stock Appreciation Rights may be
granted to awardees either alone (“freestanding”) or in
addition to or in tandem with other awards granted under the Plan
and may, but need not, relate to a specific option granted under
the Plan. To date, we have not granted any Stock Appreciation
Rights under the Plan.
Stock Awards
Each
Stock Award agreement shall contain provisions regarding (i) the
number of shares subject to such stock award or a formula for
determining such number, (ii) the purchase price of the shares, if
any, and the means of payment for the shares, (iii) the performance
criteria, if any, and level of achievement versus these criteria
that shall determine the number of shares granted, issued,
retainable and/or vested, (iv) such terms and conditions on the
grant, issuance, vesting and/or forfeiture of the shares as may be
determined from time to time by the Administrator, (v) restrictions
on the transferability of the Stock Award, and (vi) such further
terms and conditions, in each case not inconsistent with the Plan,
as may be determined from time to time by the Administrator. To
date, we have not granted any Stock Awards under the
Plan.
Other Stock-Based Awards
An
“Other Stock-Based Award” means any other type of
equity-based or equity-related award not otherwise described by the
terms of the Plan (including the grant or offer for sale of
unrestricted shares), as well as any cash bonus based on the
attainment of qualifying performance criteria, in such amount and
subject to such terms and conditions as the Administrator shall
determine. Such awards may involve the transfer of actual shares to
participants, or payment in cash or otherwise of amounts based on
the value of shares or pursuant to attainment of a performance
goal. To-date, we have not granted any Other Stock-Based Awards
under the Plan.
Limited Transferability
Unless
determined otherwise by the Administrator, an award may not be
sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner other than by beneficiary designation, will or by the
laws of descent or distribution, including but not limited to any
attempted assignment or transfer in connection with the settlement
of marital property or other rights incident to a divorce or
dissolution, and any such attempted sale, assignment or transfer
shall be of no effect prior to the date an Award is vested and
settled. The Administrator may only make an award transferable to
an awardee’s family member or any other person or entity
provided the awardee does not receive consideration for such
transfer. If the Administrator makes an award transferable, either
as of the grant date or thereafter, such award shall contain such
additional terms and conditions as the Administrator deems
appropriate, and any transferee shall be deemed to be bound by such
terms upon acceptance of such transfer.
Change of Control
In the
event of a change of control, unless otherwise determined by the
Administrator as of the grant date of a particular award (or
subsequent to the grant date), the following acceleration,
exercisability and valuation provisions shall apply: (i) on the
date that such change of control occurs, any or all options and
Stock Appreciation Rights awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested;
(ii) except as may be provided in an individual severance or
employment agreement (or severance plan) to which an awardee is a
party, in the event of an awardee’s termination of employment
within two (2) years after a change of control for any reason other
than because of the awardee’s death, retirement, disability
or termination for cause, each option and Stock Appreciation Right
held by the awardee (or a transferee) that is vested shall remain
exercisable until the earlier of the third (3rd) anniversary of
such termination of employment (or any later date until which it
would remain exercisable under such circumstances by its terms) or
the expiration of its original term; (iii) on the date that such
change of control occurs, the restrictions and conditions
applicable to any or all Stock Awards and Other Stock-Based Awards
shall lapse and such awards shall be fully vested. Unless otherwise
provided in an award at the grant date, upon the occurrence of a
change of control, any performance-based award shall be deemed
fully earned at the target amount as of the date on which the
change of control occurs. All Stock Awards, Other Stock-Based
Awards and cash awards shall be settled or paid within thirty (30)
days of vesting hereunder; (iv) the Administrator, in its
discretion, may determine that, upon the occurrence of a change of
control of the Company, each option and Stock Appreciation Right
outstanding shall terminate within a specified number of days after
notice to the participant, and/or that each participant shall
receive, with respect to each share subject to such option or Stock
Appreciation Right, an amount equal to the excess of the fair
market value of such share immediately prior to the occurrence of
such change of control over the exercise price per share of such
option and/or Stock Appreciation Right; such amount to be payable
in cash, in one or more kinds of stock or property (including the
stock or property, if any, payable in the transaction) or in a
combination thereof, as the Administrator, in its discretion, shall
determine, and if there is no excess value, the Administrator may,
in its discretion, cancel such awards.
Adjustments
In the
event of (i) a stock dividend, extraordinary cash dividend, stock
split, reverse stock split, share combination, or recapitalization
or similar event affecting our capital structure or (ii) a merger,
consolidation, acquisition of property or shares, separation,
spin-off, reorganization, liquidation, disaffiliation, or similar
event affecting us or any of our subsidiaries, the Administrator or
our Board may in its discretion make such substitutions or
adjustments as it deems appropriate and equitable. In the case of
share changes, such adjustments shall be mandatory in order to
avoid material impairment of any outstanding award; provided,
however, the Administrator or the Board shall retain discretion to
determine the appropriate and equitable substitutions and
adjustments that will be made to avoid such material
impairment.
Amendment and Termination
Our
Board may amend, alter or discontinue the Plan or any award
agreement, but any such amendment shall be subject to approval of
our stockholders in the manner and to the extent required by
applicable law.
Option Grants Under the Plan
In
April 2016, our Board granted to non-employee board members and our
acting chief financial officer stock options to purchase up to an
aggregate 273,000 shares of our common stock at an exercise price
of $0.001 per share (the par value) based upon a third-party
valuation of our common stock. Such stock options vest 50% on grant
date, 25% on the six month anniversary of the grant date and 25% on
the one year, anniversary of the grant date. In December 2016, our
Board granted to our acting chief medical officer options to
purchase up to 7,000 shares of our common stock. Such options vest
monthly over six months from the grant date. In February 2017, our
Board granted to its Members and our acting chief financial officer
stock options to purchase up to an aggregate 275,520 shares of our
common stock at an exercise price of $0.001 per share (the par
value) based upon a third-party valuation of our common stock. Such
options vest 6/48ths upon the six month anniversary of the grant
date and 1/48th per month thereafter. In September 2017 and
November 2017, stock options to purchase up to an aggregate 103,072
shares of our common stock were granted at an exercise price of
$6.00, based on the price per share at which common stock was sold
in our most recent private offering. 61,024 of such options vest
6/48ths upon the six-month anniversary of the grant date and 1/48th
per month thereafter, 21,024 of such options vest 6/42nd upon the
six month anniversary of the grant date and 1/42nd per month
thereafter and 21,024 of such options vest 6/24ths upon the six
month anniversary of the grant date and 1/24th per month
thereafter. On January 1, 2018, our Board granted to our acting
chief medical officer options to purchase up to 32,004 shares of
our common stock at an exercise price of $6 per share, and such
options vest 12,000 on the date of grant and 1,667 options on the
1st of each month thereafter. On May 21, 2018, our Board granted to
an employee options to purchase up to 5,000 shares of our common
stock at an exercise price of $6 per share, and such options vest
6/48ths on the grant date ant 1/48th per month thereafter. On
August 6, 2018, our Board granted to an employee options to
purchase up to 5,000 shares of our common stock at an exercise
price of $6 per share, and such options vest 6/48ths on the six
month anniversary of grant date ant 1/48th per month thereafter. In
August 2018, stock options to purchase up to an aggregate 425,300
shares of our common stock were granted at an exercise price of
$6.00. 104,400 options vest commencing on October 1, 2018 quarterly
over five quarters. 320,900 options vest commencing on October 1,
2018 6/51 on the six month anniversary of vesting commencement date
and 1/51 per month thereafter. In December 2018, stock options to
purchase up to an aggregate 20,000 shares of our common stock were
granted at an exercise price of $6.00. The exercise price of the
stock options granted in 2018 are based upon the price per share at
which our common stock was sold in our most recent private
offering. In 2018, 40,000 options expired related to an employment
termination. All outstanding stock options have a ten-year term.
1,105,896 stock options were outstanding as of November 4,
2019.
401(k)
Plan
We
maintain a defined contribution employee retirement plan for our
employees. The plan is intended to qualify as a tax-qualified plan
under Section 401(k) of the Code so that contributions to the
401(k) plan, and income earned on such contributions, are not
taxable to participants until withdrawn or distributed from the
401(k) plan.
The
401(k) plan provides that each participant may contribute up to
100% of his or her pre-tax compensation, up to a statutory limit,
which is $18,500 for 2018, a $500 increase from 2017 and 2016
limits. Participants who are at least 50 years old can also make
“catch-up” contributions, which in 2018 may be up to an
additional $6,000 above the statutory limit.
Employees become
eligible to participate in the 401(k) plan after four months of
active employment with the Company.
Under
the 401(k) plan, each employee is fully vested in his or her
deferred salary contributions. Employee contributions are held and
invested by the plan’s trustee. The 401(k) plan also permits
us to make discretionary profit sharing contributions and
discretionary matching contributions, subject to established limits
and a vesting schedule. To date, we have not made any discretionary
profit sharing or discretionary matching contributions to the plan
on behalf of participating employees.
During
the period between January 2016 and October 2017, we maintained an
individual defined contribution employee retirement plan
(“i401(k)”) for Dr. Robinson, our only employee during
that period. Under the i401(k) plan we contributed for the benefit
of Dr. Robinson up to the statutory limit under Section
415(c)(1)(A) of the Code, which was $54,000 in 2017 and $53,000 in
2016.
Director Compensation for Fiscal Year Ended December 31,
2018
The
following table sets forth the compensation of our non-employee
directors on our Board during the year ended December 31,
2018.
|
Fees earned or paid in cash ($)
|
|
All Other Compensation ($)
|
|
Christopher
M. Starr, Ph.D.
|
105,673
|
109,523
|
—
|
215,196
|
Michael
J. Brown
|
45,500
|
109,523
|
—
|
155,023
|
Raymond
W. Anderson
|
55,625
|
109,523
|
—
|
165,148
|
Arthur
J. Klausner
|
46,125
|
109,523
|
—
|
155,648
|
(1)
Based upon the Black-Scholes valuation model for stock option
compensation expense, Option Awards represents the
following:
For
each of Dr. Starr, Mr. Brown, Mr. Anderson and Mr. Klausner, stock
options to purchase up to
26,100 shares of our common stock were awarded on August 28, 2018;
these options commenced vesting on October 1, 2018, vest quarterly
over five quarters and were valued at $109,523 for each
individual.
As of December 31, 2018, our non-employee
directors held the following number of stock options:
Name
|
Aggregate Number of Shares Subject to Stock Options
|
|
|
Christopher M. Starr, Ph.D.
|
194,100
|
Michael J. Brown
|
47,124
|
Raymond W. Anderson
|
47,124
|
Arthur J. Klausner
|
47,124
|
Options Exercised and Stock Vested
None
of our executive officers or non-employee directors exercised any
options during the years ended December 31, 2018 and 2017.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2018, with
respect to shares of our common stock that may be issued under
existing equity compensation plans. All of our equity compensation
plans have been approved by our security holders.
Plan
Category
|
Number of Securities to be Issued Upon Exercise of Outstanding
Options, Warrants and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants
and Rights
|
Number of Securities Remaining Available For Future Issuance under
Equity Compensation Plans
|
Equity compensation
plans approved by security holders (1)
|
1,105,896
|
$2.99
|
494,104
|
(1) The
Monopar Therapeutics Inc. 2016 Stock Incentive Plan.
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Since
January 2015, we (including as Monopar Therapeutics, LLC) have
engaged in the following transactions with our directors, executive
officers, holders of more than 5% of our voting securities, and
affiliates or immediate family members of our directors, executive
officers and holders of more than 5% of our voting securities, and
our co-founders. We believe that all of these transactions were on
terms as favorable as could have been obtained from unrelated third
parties.
During
the years ended December 31, 2018 and 2017, we paid or accrued
legal fees to Baker & Hostetler, LLP, a large national law
firm, in which a family member of the Company’s Chief
Executive Officer was a law partner until January 31, 2019,
approximately $152,094 and $289,175, respectively. The family
member billed a de minimis
amount of time on our legal engagement with Baker & Hostetler,
LLP.
Contributions
by Tactic Pharma
We were
initially formed as a Delaware limited liability company in
December 2014, with the name Monopar Therapeutics, LLC, at which
time Tactic Pharma contributed technology and related assets of
MNPR- 101 to us, in exchange for 1,000,000 shares of Series Z
Preferred Units, which were exchanged for 100,000 shares of Series
Z Preferred Stock at the time of our conversion to a corporation.
The issued Series Z Preferred Stock was recorded at par value
$0.001 per share on our balance sheet reflecting the historical
capitalized cost basis, due to the fact that MNPR-101’s
development costs were previously expensed (not capitalized) by
Tactic Pharma. In March 2017, the 100,000 shares of Series Z
Preferred Stock were converted into 7,000,000 shares of our common
stock, $.0001 par value in connection with the Conversion. See
“Conversion of Preferred Stock to common stock”. We
reimbursed Tactic Pharma, a de
minimis amount in monthly storage fees during the year ended
December 31, 2017 and nothing during the year ended December 31,
2018. In March 2017, Tactic Pharma wired $1,000,000 to us in
advance of the sale of our common stock at $6 per share under a
private placement memorandum. In April 2017, we issued to Tactic
Pharma 166,667 shares in exchange for the $1,000,000 at $6 per
share once we began selling our common stock to unaffiliated
parties under the private placement memorandum. In August 2017,
Tactic Pharma surrendered 2,888,727.12 shares of our common stock
back to us as a contribution to the capital of the Company. This
resulted in reducing Tactic Pharma’s ownership in us from
79.5% to 69.9%. Following the surrender of the common stock, Tactic
Pharma contributed 4,111,272.88 shares of its holdings in our
common stock to TacticGem pursuant to the Gem Transaction discussed
in detail in below. As of November 4, 2019, Tactic
Pharma beneficially owned 46% of our common stock, and TacticGem
owned 77% of our common stock.
Gem
Transaction
On June
27, 2017, we signed a term sheet with Gem pursuant to which Gem was
to transfer assets related to certain of its product candidate
programs to us in exchange for 32% of our outstanding common stock
on a fully-diluted basis. The Gem transaction was structured
through a limited liability company, TacticGem, which Gem formed
with Tactic Pharma, our largest stockholder at that time. Gem
contributed certain of Gem’s product candidates’
intellectual property and agreements associated primarily with
Gem’s GPX-150 (renamed camsirubicin) product candidate program,
along with $5,000,000 in cash (the “Gem Contributed
Assets”) to TacticGem for a 42.633% interest, and Tactic
Pharma contributed 4,111,272.88 shares of our common stock to
TacticGem for a 57.367% interest. Then, TacticGem contributed the
Gem Contributed Assets to us in exchange for 3,055,394.12 newly
issued shares of our common stock (31.4% on a fully-diluted basis)
(the two contributions collectively, the “Gem
Transaction”). The contribution by TacticGem, made in
conjunction with contributions from outside investors in a private
offering, was intended to qualify for tax-free treatment. The Gem
Transaction closed on August 25, 2017. Following the Gem
Transaction, TacticGem owns 7,166,667 shares of our stock. Pursuant
to the TacticGem limited liability company agreement, all votes of
our common stock by TacticGem (aside from the election of our
Board) is required to be passed through to Tactic Pharma and Gem
based on their percentage interest (currently pursuant to this
voting agreement, Tactic Pharma has voting and investment power
over 4,111,272.88 shares of our common stock and Gem has voting and
investment power over 3,055,394.12 shares of our common stock).
Neither Gem nor TacticGem was a related person prior to the Gem
Transaction. The TacticGem limited liability company agreement
provides that its manager will vote all shares of our common stock
held by it to elect Tactic Pharma’s nominees to our Board
plus one person nominated by Gem, initially Arthur J. Klausner. Gem
submitted an IND in February 2007, for camsirubicin, formerly known as GPX-150,
for the treatment of cancer. The IND remains open and was
transferred to us in February 2018.
Pursuant to the Conversion
and the Gem Transaction and sales of our common stock in September
2017, Tactic Pharma now holds voting and investment power over
4,277,939.88 shares of our common stock, which is 46.0% of our
outstanding common stock. In the ordinary course of business, we
have reimbursed and continue to reimburse Tactic Pharma for
expenses Tactic Pharma has paid on our behalf, which historically
included legal patent fees and storage rental fees. Certain of our
Board Members and executive officers own and control Tactic Pharma.
Although no single person has a controlling interest in Tactic
Pharma, acting together, they are able to control Tactic Pharma and
a large voting block of our common stock.
Stock Purchases
by Directors and Executive Officers
The
following table sets forth the number of shares of our common stock
owned by our co-founders and directors (taking into account the
Conversion).
|
|
|
|
|
|
|
Transaction
Value
(and
Related Person’s Interest) ($)
|
Christopher M.
Starr, Ph.D.
|
|
Executive
Chairman
|
|
2016
|
29,400
|
$3.57
|
105,000
|
|
|
|
2017
|
20,000
|
$6.00
|
120,000
|
Chandler D.
Robinson, M.D.
|
|
Director, Chief
Executive Officer
|
|
2016
|
14,002.3
|
$3.57
|
50,010
|
Andrew P. Mazar,
Ph.D.
|
|
Director, Executive
Vice President of Research and Development, Chief Scientific
Officer
|
|
2016
|
14,002.3
|
$3.57
|
50,010
|
Michael J.
Brown
|
|
Director
|
|
2016
|
210,000
|
$3.57
|
750,000
|
Raymond W.
Anderson
|
|
Director
|
|
2017
|
1,000
|
$6.00
|
6,000
|
Arthur J.
Klausner
|
|
Director
|
|
2017
|
5,000
|
$6.00
|
30,000
|
Promoters
and Certain Control Persons
We have
not had any promoters since our formation in December
2014.
Majority
Stockholders
Prior
to the Gem Transaction, Tactic Pharma was our majority stockholder,
having a controlling interest in us. After the Gem Transaction,
TacticGem became our majority stockholder, and currently has a
77.1% controlling interest in us. See “Contributions by
Tactic Pharma, LLC” and “Gem
Transaction”.
Participation in
the Offering
Certain of our existing stockholders
and their affiliated entities, including those affiliated with
certain of our officers and directors, have indicated an interest
in purchasing up to approximately $8,000,000 of shares of our
common stock at the initial public offering price. However, because indications of interest are not
binding agreements or commitments to purchase, the underwriters may
determine to sell more, less or no shares in this offering to any
of these stockholders or their affiliates, or any of these
stockholders or their affiliates may determine to purchase more,
less or no shares in this offering. The table above
does not reflect any potential purchases by such stockholders in
this offering.
Director
Independence
We
have decided to follow the Nasdaq listing standards, which require
that a majority of the members of our Board must qualify as
“independent,” as affirmatively determined by our
Board. Our Board consults with our counsel to ensure that our
Board’s determinations are consistent with relevant
securities and other laws and regulations regarding the definition
of “independent,” including those set forth in
pertinent listing standards of Nasdaq, as in effect from time to
time.
Consistent
with these considerations, after review of all relevant identified
transactions or relationships between each director, or any of his
family members, and us, our senior management and our independent
registered public accounting firm, our Board has affirmatively
determined that the following four directors are independent
directors within the meaning of the applicable Nasdaq listing
standards: Dr. Starr, Mr. Brown, Mr. Anderson and Mr. Klausner. In
making this determination, our Board found that none of the
directors had a material or other disqualifying relationship with
us. Dr. Robinson, our President and Chief Executive Officer is not
an independent director by virtue of his employment relationship
with us, and similarly, Dr. Mazar by virtue of his employment
relationship with us is not an independent director.
There
are no family relationships among any of our directors or executive
officers.
Relationships
Considered in Determining Director Independence
In
addition to the stock transactions described above, in considering
director independence, we considered the following
transactions:
During
the years ended December 31, 2018 and 2017, we were advised by four
members of our Board, who were managers of our predecessor LLC
prior to our conversion to a C Corporation. The four former
Managers are also current holders of our common stock (owning an
aggregate 3.1% of our common stock outstanding as of December 31,
2018). As of December 31, 2018, three of the former Managers were
also Managing Members of Tactic Pharma, which was, prior to the Gem
Transaction, our largest and controlling stockholder (owning a
46.0% beneficial interest in us at December 31, 2018 and in
partnership with Gem through TacticGem owning 77.1%). We paid the
Managing Members of Tactic Pharma, LLC the following during the
years ended December 31, 2018 and 2017: Chandler D. Robinson, our
Co-Founder, Chief Executive Officer, common stockholder, Managing
Member of Tactic Pharma, and former Manager of our predecessor LLC,
$430,000 and $346,545, respectively; Andrew P. Mazar, our
Co-Founder, Chief Scientific Officer, common stockholder, Managing
Member of Tactic Pharma, and former Manager of our predecessor LLC,
$405,000 and $300,731, respectively; and Michael Brown, Board
Member, common stockholder, a Managing Member of Tactic Pharma, LLC
until February 1, 2019 and former Manager of our predecessor LLC,
Board fees of $45,500 and $20,000, respectively. We also paid
Christopher M. Starr, our Co-Founder, Executive Chairman of the
Board, common stockholder and former Manager of our predecessor
LLC, Board of Director fees $105,673 and $100,897 during the years
ended December 31, 2018 and 2017, respectively. On February 1, 2019
Mr. Brown entered into an agreement with Tactic Pharma whereby it
was agreed that he would become a non-managing member of Tactic
Pharma with respect to any votes, decisions or matters relating to
Monopar and not exercise any manager votes or decisions of Tactic
Pharma related to Monopar. As a non-managing member of Tactic
Pharma in connection with any decisions relating to Monopar Mr.
Brown is an independent board member of Monopar as contemplated by
Rule 10A-3 under the Exchange Act.
In
the normal course of business, our officers, Board Members and
consultants incur expenses on behalf of us and are reimbursed
within 30 days of submission of relevant expense
reports.
The
following table and the related notes present information on the
beneficial ownership of shares of our common stock, our only
outstanding class of stock, as of November 1, 2019
by:
●
each of our named
executive officers;
●
all of our current
directors and executive officers as a group; and
●
each person known
by us to beneficially own more than five percent of our common
stock
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting or investment power with respect to the securities.
Shares of our common stock that may be acquired by an individual or
group within 60 days of November 1, 2019, pursuant to
the exercise of options or warrants, are deemed to be outstanding
for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person
shown in the table. Beneficial ownership is based upon 9,291,421
shares of our common stock outstanding as of November
1, 2019.
Certain
of our existing stockholders and their affiliated entities,
including those affiliated with certain of our officers and
directors, have indicated an interest in purchasing up to
approximately $8,000,000 of shares of our common stock at the
initial public offering price. However, because indications of interest are not
binding agreements or commitments to purchase, the underwriters may
determine to sell more, less or no shares in this offering to any
of these stockholders or their affiliates, or any of these
stockholders or their affiliates may determine to purchase more,
less or no shares in this offering. The information set forth in the table below does
not reflect any potential purchase of any shares in this offering
by such parties.
Except
as indicated in footnotes to this table, we believe that the
stockholders named in this table have sole voting and investment
power with respect to all shares of common stock shown to be
beneficially owned by them, based on information provided to us by
such stockholders.
Name
and Address of Beneficial Owner
|
|
|
|
|
*Unless otherwise noted, addresses are:
1000 Skokie Blvd., Suite 350, Wilmette, IL
60091
|
|
Shares
of Common Stock Beneficially Owned
|
|
Percent of Class Held
|
TacticGem,
LLC(1)
|
|
7,166,667
|
|
77.1%
|
Tactic Pharma
LLC(1)
|
|
4,277,940
|
|
46.0%
|
Gem Pharmaceuticals
LLC(1)
200
Randolph Avenue, Huntsville, AL 35801
|
|
3,055,394
|
|
32.9%
|
Chandler D.
Robinson, Chief Executive Officer and Director(2)
|
|
200,298
|
|
2.1%
|
Christopher M.
Starr, Executive Chairman and Director(3)
|
|
219,000
|
|
2.3%
|
Andrew P. Mazar,
Executive Vice President of Research and Development, Chief
Scientific Officer and Director(4)
|
|
196,998
|
|
2.1%
|
Michael J. Brown,
Director(5)
|
|
257,124
|
|
2.8%
|
Raymond W.
Anderson, Director(6)
|
|
40,616
|
|
*
|
Arthur J. Klausner,
Director(7)
|
|
42,926
|
|
*
|
Kim R. Tsuchimoto,
Chief Financial Officer(8)
|
|
49,750
|
|
*
|
Patrice P. Rioux,
Acting Chief Medical Officer(9)
|
|
59,004
|
|
*
|
Named executive
officers and directors as a group (8 persons)(10)
|
|
8,232,383
|
|
81.8%
|
(1)
Tactic Pharma
shares voting and investment power over 4,111,273 shares of our
common stock owned by TacticGem, and Gem shares voting and
investment power over 3,055,394 shares of our common stock owned by
TacticGem, because pursuant to the TacticGem limited liability
company agreement all votes of our common stock (other than votes
for the election of directors) are passed through to Tactic Pharma
and Gem in proportion to their percentage interests in TacticGem,
and after an initial holding period, which ends after we have been
subject to the reporting requirements of the Exchange Act and have
filed all required reports for a period of at least 12 months,
either member of TacticGem can cause up to its proportionate shares
of our common stock to be distributed to it. Tactic Pharma holds
166,667 shares of stock in its own name. Dr. Mazar and Dr. Robinson
are managers of Tactic Pharma; because of this, they control voting
and dispositive power over 4,111,273 shares of our common stock
owned by TacticGem, and over our common stock owned by Tactic
Pharma. Gem is controlled by Pharma Investments, LLC, which is in
turn controlled by Diane M. Hendricks.
(2)
Includes
186,295 common stock options that vest within 60 days
after November 1, 2019.
(3)
Includes
169,600 common stock options that vest within 60 days
after November
1, 2019.
(4)
Includes
182,995 common stock options that vest within 60 days
after November 1,
2019.
(5)
Includes
47,124 common stock options that vest within 60 days
after November 1, 2019.
(6)
Includes
39,616 common stock options that vest within 60 days
after November 1, 2019.
(7)
Includes
37,926 common stock options that vest within 60 days
after November 1, 2019.
(8)
Includes
49,750 common stock options that vest within 60 days
after November 1,
2019.
(9)
Includes
59,004 common stock options that vest within 60 days
after November 1, 2019.
(10)
Shares held
by TacticGem are only included in the total beneficial ownership of
our named executive officers and directors because the limited
liability agreement of TacticGem provides that the Manager of
TacticGem will vote our common stock held by TacticGem to elect
Tactic Pharma’s nominees plus one person designated by Gem
(until we achieve listing on a national stock exchange) to our
Board, and acting together the directors are able to control Tactic
Pharma and how it selects its nominees for our Board.
DESCRIPTION OF CAPITAL
STOCK
We have
the authority to issue 40,000,000 shares of Common Stock, $0.001
par value. As of November 4, 2019, there were
9,291,421 shares of our Common Stock issued and
outstanding.
We have
reserved 1,600,000 shares of our Common Stock for issuance under
our 2016 Stock Incentive Plan, as subsequently amended (the
“Plan”), and as of November 4, 2019, we
have granted stock options to purchase up to 1,105,896 shares of
our Common Stock under the Plan. See “Stock Option
Plan”.
Common Stock
Voting Rights
The
holders of shares of our Common Stock are entitled to one vote per
share for the election of directors and on all other matters
submitted to a vote of stockholders. Shares of our Common Stock do
not have cumulative voting rights. The election of our Board is
decided by a plurality of the votes cast at a meeting of our
stockholders by the holders of stock entitled to vote in the
election.
Dividends
Holders
of our Common Stock are entitled to receive such dividends as may
be declared by our Board out of funds legally available
therefor.
Liquidation
Upon
our dissolution and liquidation, holders of our Common Stock are
entitled to a ratable share of our net assets remaining after
payments to our creditors.
Rights and Preferences
Our
stockholders have no preemptive rights to acquire additional shares
of our Common Stock or other securities. The shares of our Common
Stock are not subject to redemption.
Preferred Stock
We have
no preferred stock authorized or outstanding.
Anti-Takeover Provisions
Delaware Law
We
are subject to Section 203 of the Delaware General Corporation Law.
Subject to certain exceptions, Section 203 prevents a publicly held
Delaware corporation from engaging in a "business combination" with
any "interested stockholder" for three years following the date
that the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of
our Board or unless the business combination is approved in a
prescribed manner. A "business combination" includes, among other
things, a merger or consolidation involving us and the "interested
stockholder" and the sale of more than 10% of our assets. In
general, an "interested stockholder" is any entity or person
beneficially owning 15% or more of our outstanding voting stock and
any entity or person affiliated with or controlling or controlled
by such entity or person.
Authorized but Unissued Shares
The
authorized but unissued shares of our Common Stock are available
for future issuance without stockholder approval, subject to any
limitations imposed by the listing standards of any exchange on
which our shares are listed. These additional shares may be used
for a variety of corporate finance transactions, acquisitions and
employee benefit plans. The existence of authorized but unissued
and unreserved Common Stock could make more difficult or discourage
an attempt to obtain control of us by means of a proxy contest,
tender offer, merger or otherwise.
Election of Director by Plurality of Shares; Vacancies
Our
Amended and Restated By-laws provide that directors will be elected
by a plurality of votes cast by the shares present in person or by
proxy at a meeting of the stockholders and entitled to vote
thereon, a quorum being present at such meeting. There is no
cumulative voting, meanings that Directors may be elected with a
vote of holders of less than a majority of the outstanding common
stock.
Our
Amended and Restated By-laws also provide that vacancies occurring
on our Board may be filled by the affirmative votes of a majority
of the remaining members of our Board or by the sole remaining
director, and not by our stockholders. Such provisions in our
corporate organizational documents and under Delaware law may
prevent or frustrate attempts by our stockholders to change our
management or hinder efforts to acquire a controlling interest in
us. The inability to make changes to our Board could prevent or
discourage an attempt to take control of the Company by means of a
proxy contest, tender offer, merger or otherwise.
Special Meeting of Stockholders; Advance Notice Requirements for
Stockholder Proposals and Director Nominations; Stockholder
Action
Our
Amended and Restated By-laws provide that, except as otherwise
required by law, special meetings of the stockholders can only be
called by our Board. Stockholders at a special meeting may only
consider matters set forth in the notice of the meeting. These
provisions could have the effect of delaying until the next
stockholder meeting stockholder actions that are favored by the
holders of a majority of our outstanding voting
securities.
Super Majority Voting
The General Corporation Law of the State of
Delaware provides generally that the affirmative vote of a majority
of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as
the case may be, require a greater
percentage. Our Amended and Restated By-laws may be amended or
repealed by a majority vote of our Board or the affirmative vote of
the holders of at least a majority of the votes that all our
stockholders would be entitled to cast in any election of
Directors.
Registration Rights
We are
subject to an agreement with TacticGem (pursuant to the Gem
Transaction as discussed later in this document), which obligates
us to file Form S-3 or other appropriate form of registration
statement covering the resale of any of our Common Stock by
TacticGem, Gem, or Tactic, upon direction by TacticGem at any time
after we have been subject to the reporting requirements of the
1934 Act for at least twelve months (the “Initial Holding
Period’). We are required to use our best efforts to have
such registration statement declared effective as soon as practical
after it is filed. In the event that such registration statement
for resale is not approved by the SEC, and TacticGem submits a
written request, we are required to prepare and file a registration
statement on Form S-1 registering such Common Stock for resale and
to use our best efforts to have such registration statement
declared effective as soon as practical thereafter. After
registration, pursuant to these rights, these shares will become
freely tradable without restriction under the Securities Act other
than pursuant to restrictions on affiliates under Rule 144.
TacticGem has agreed to enter into a lock-up agreement and to not
exercise any rights of resale for 180 days after the date of this
prospectus.
Listing
We have
been approved to list our common stock on the Nasdaq
Capital Market under the symbol “MNPR” upon
closing this offering.
Transfer Agent and Registrar
In
April 2018, we appointed VStock Transfer, LLC
(“VStock”) as our transfer agent and registrar for our
Common Stock. VStock’s address is 18
Lafayette Place, Woodmere, NY 11598.
We
are selling the shares of our Common Stock to the underwriters
named in the table below, for JonesTrading Institutional Services
LLC is acting as representative, pursuant to an underwriting
agreement dated as of the date of this prospectus. We have agreed
to sell to each of the underwriters, and each of the underwriters
has severally agreed to purchase, the number of shares of our
Common Stock set forth opposite that underwriter's name in the
table below:
Underwriters
|
Number of Shares
|
JonesTrading Institutional Services LLC
|
|
Aegis Capital
Corp.
|
|
Arcadia Securities,
LLC
|
|
|
|
Total
|
2,222,223
|
Under
the terms and conditions of the underwriting agreement, the
underwriters must buy all of the shares of Common Stock if they buy
any of them, other than those shares of Common Stock covered by the
Option to purchase additional shares described below. The
underwriting agreement provides that the obligations of the
underwriters pursuant thereto are subject to certain conditions. In
the event of a default by an underwriter, the underwriting
agreement provides that, in certain circumstances, the purchase
commitments of the non-defaulting underwriters may be increased or
the underwriting agreement may be terminated. The underwriters will
sell the shares of Common Stock to the public when and if the
underwriters buy the shares from us. The offering of the shares of
our Common Stock by the underwriters is subject to receipt and
acceptance and subject to the underwriters' right to reject any
order in whole or in part.
The
following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters by us in
connection with the offering of the shares of Common Stock. Such
amounts are shown assuming both no exercise and full exercise of
the underwriters' Option to purchase additional
shares.
|
No Exercise
|
Full Exercise
|
Per share
|
$
|
|
|
$
|
|
|
Total
|
$
|
|
|
$
|
|
|
The
representative of the underwriters has advised us that the
underwriters propose to offer the shares of our Common Stock
directly to the public at the public offering price on the cover of
this prospectus, and the underwriters may offer our Common Stock to
selected dealers, which may include the underwriters, at such
offering price less a selling concession not in excess of $
per share. The underwriters may allow, and the
selected dealers may re-allow, a discount from the concession not
in excess of $ per share to
other dealers. After the initial offering, the representative may
change the offering price and other selling terms. Sales of shares
made outside of the United States may be made by affiliates of the
underwriters.
We
estimate that our expenses in connection with the sale of the
shares of Common Stock, other than the underwriting discounts, will
be approximately $0.5 million. We have agreed to
reimburse the underwriters up to $175,000 for certain
offering-related expenses incurred by them and the legal fees and
disbursements of their counsel.
The
underwriters have an Option to buy up to an additional
333,333 shares of Common Stock from us at the public
offering price, less the underwriting discounts and commissions.
They may exercise that Option for 30 days. If any shares are
purchased pursuant to this Option, the underwriters will severally
purchase shares in approximately the same proportion as set forth
in the table above.
Certain
of our existing stockholders and their affiliated entities,
including those affiliated with certain of our officers and
directors, have indicated an interest in purchasing up to
approximately $8,000,000 of shares of our common stock at the
initial public offering price. However, because indications of interest are not
binding agreements or commitments to purchase, the underwriters may
determine to sell more, less or no shares in this offering to any
of these stockholders or their affiliates, or any of these
stockholders or their affiliates may determine to purchase more,
less or no shares in this offering.
Subject
to certain conditions that must be met with respect to this
offering, we granted JonesTrading Institutional Services LLC a
right of first refusal, for a period of nine months following the
completion of the offering, to act as sole-lead underwriter,
sole-lead initial purchaser, sole-lead placement/selling agent or
sole-lead arranger on any public or private offering of equity,
debt, or hybrid securities of the Company.
In
order to facilitate the offering of the shares of Common Stock, the
underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the shares. Short sales involve the
sale by the underwriters of a greater number of shares than they
are required to purchase in the offering, and a short position
represents the amount of such sales that have not been covered by
subsequent purchases. A “covered short position” is a
short position that is not greater than the amount of additional
shares for which the underwriters’ Option described above may
be exercised. Specifically, the underwriters may cover any covered
short position by exercising their Option to purchase additional
shares. In addition, to cover short positions or to stabilize the
price of the shares, the underwriters may bid for, and purchase,
the shares in the open market. In determining the source of shares
to cover the covered short position, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which they
may purchase additional shares pursuant to the Option described
above. “Naked” short sales are any short sales that
create a short position greater than the amount of additional
shares for which the Option described above may be exercised. The
underwriters must cover any such naked short position by purchasing
shares in the open market. A naked short position is more likely to
be created if the underwriters are concerned that there may be
downward pressure on the price of the Common Stock in the open
market after pricing that could adversely affect investors who
purchase in the offering. Any of these activities may stabilize or
maintain the market price of the shares above independent market
levels.
The
underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representative has
repurchased shares of Common Stock sold by or for the account of
such underwriter in stabilizing or short covering
transactions.
Purchases
to cover a short position and stabilizing transactions, as well as
other purchases by the underwriters for their own accounts, may
have the effect of preventing or retarding a decline in the market
price of our Common Stock, and together with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market
price of the Common Stock. As a result, the price of the Common
Stock may be higher than the price that otherwise might exist in
the open market. The underwriters are not required to engage in
these activities and may end any of these activities at any time.
These transactions may be effected on the Nasdaq Capital Market, in
the over-the-counter market or otherwise.
We
have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters may
be required to make in respect of those liabilities.
Market for Shares
Prior
to this offering, there has been no public market for our
securities. The initial public offering price will be determined by
negotiations between us and the representative of the underwriters.
In determining the initial public offering price, we and the
representative of the underwriters expect to consider a number of
factors including:
●
the
information set forth in this prospectus and otherwise available to
the representative;
●
our
prospects and the history and prospects for the industry in which
we compete;
●
an
assessment of our management;
●
our
prospects for future earnings;
●
the
general condition of the securities markets at the time of this
offering;
●
the
recent market prices of, and demand for, publicly traded common
stock of generally comparable companies; and
●
other
factors deemed relevant by the representative of the underwriters
and us.
Neither
we nor the underwriters can assure investors that an active trading
market will develop for the shares of our Common Stock, or that the
shares will trade in the public market at or above the initial
public offering price.
Other Relationships
The
underwriters and their respective affiliates are full service
financial institutions engaged in various activities, which may
include securities trading, commercial and investment banking,
financial advisory, investment management, investment research,
principal investment, hedging, financing and brokerage activities.
Certain of the underwriters and their respective affiliates [have,
from time to time, performed, and] may in the future perform,
various financial advisory and investment banking services for us,
for which they may receive customary fees and
expenses.
In
the ordinary course of their various business activities, the
underwriters and their respective affiliates have made or held, and
may in the future make or hold, a broad array of investments
including serving as counterparties to certain derivative and
hedging arrangements, and may have actively traded, and, in the
future may actively trade, debt and equity securities (or related
derivative securities), and financial instruments (including bank
loans) for their own account and for the accounts of their
customers and may have in the past and at any time in the future
hold long and short positions in such securities and instruments.
Such investment and securities activities may have involved, and in
the future may involve, securities and instruments of our company.
Certain of the underwriters or their affiliates that have a lending
relationship with us routinely hedge their credit exposure to us
consistent with their customary risk management policies.
Typically, such underwriters and their affiliates would hedge such
exposure by entering into transactions which consist of either the
purchase of credit default swaps or the creation of short positions
in our securities, including potentially the shares offered hereby.
Any such credit default swaps or short positions could adversely
affect future trading prices of the shares offered hereby. The
underwriters and their affiliates may also make investment
recommendations and/or publish or express independent research
views in respect of such securities or financial instruments and
may hold, or recommend to clients that they acquire, long and/or
short positions in such securities and instruments.
Lock Up Agreements
We,
our officers, directors and 2% or greater stockholders have
agreed that subject to certain exceptions, without the prior
written consent of JonesTrading Institutional Services LLC, on
behalf of the underwriters, we and they will not directly or
indirectly, (1) issue (in the case of us), offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant
to purchase, or otherwise dispose of or transfer, directly or
indirectly, any additional shares of Common Stock or equity
securities similar to or ranking on par with or senior to the
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or such similar, parity or senior
equity securities, (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of Common Stock or such similar, parity
or senior equity securities, (3) in the case of us, file or cause
to be filed a registration statement, including any amendments,
with respect to the registration of any shares of Common Stock or
equity securities similar to or ranking on par with or senior to
the Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or such similar, parity or senior
equity securities, or (4) publicly disclose the intention to do any
of the foregoing, for a period commencing on the date hereof and
ending on the 180th day after the date of this
prospectus.
JonesTrading
Institutional Services LLC, in its sole discretion, may release the
Common Stock and other securities subject to the lock-up provisions
described above in whole or in part at any time with or without
notice. When determining whether or not to release Common Stock and
other securities from such provisions, JonesTrading Institutional
Services LLC will consider, among other factors, the number of
shares of Common Stock and other securities for which the release
is being requested, the reason for release and market conditions at
the time.
Nasdaq Listing
We
have been approved to list our Common Stock on the
Nasdaq Capital Market under the symbol “MNPR”
upon closing this offering.
Selling Restrictions
European Economic Area
In relation to each Member
State of the European Economic Area (each, a “Relevant Member
State”), each underwriter has represented and agreed that
with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) it has not made and will not make an
offer of shares which are the subject of the offering contemplated
by this prospectus to the public in that Relevant Member State
other than:
a)
to any legal entity which is a qualified
investor as defined in the Prospectus
Directive;
b)
to fewer than 150 natural or legal persons
(other than qualified investors as defined in the Prospectus
Directive), as permitted under the Prospectus Directive, subject to
obtaining the prior consent of the relevant Dealer or Dealers
nominated by the issuer for any such offer; or
c)
in any other circumstances falling within
Article 3(2) of the Prospectus Directive
provided that no such offer of shares shall require the issuer or
any Underwriter to publish a prospectus pursuant to Article 3 of
the Prospectus Directive or supplement a prospectus pursuant to
Article 16 of the Prospectus Directive.
This
prospectus has been prepared on the basis that any offer of shares
in any Relevant Member State will be made pursuant to an exemption
under the Prospectus Directive from the requirement to publish a
prospectus for offers of shares. Accordingly any person making or
intending to make an offer in that Relevant Member State of shares
which are the subject of the offering contemplated in this
prospectus may only do so in circumstances in which no obligation
arises for the Company or any of the underwriters to publish a
prospectus pursuant to Article 3 of the Prospectus Directive in
relation to such offer. Neither we nor the underwriters have
authorized, nor do they authorize, the making of any offer of
shares in circumstances in which an obligation arises for Devon or
the underwriters to publish a prospectus for such
offer.
For
the purposes of this provision, the expression an “offer of
shares to the public” in relation to any shares in any
Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer and
the shares to be offered so as to enable an investor to decide to
purchase or subscribe the shares, as the same may be varied in that
Member State by any measure implementing the Prospectus Directive
in that Member State, the expression “Prospectus
Directive” means Directive 2003/71/EC (and amendments
thereto, including the 2010 PD Amending Directive), and includes
any relevant implementing measure in the Relevant Member State and
the expression “2010 PD Amending Directive” means
Directive 2010/73/EU.
United Kingdom
Each
Underwriter has represented and agreed that:
a)
it
has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement
to engage in investment activity (within the meaning of Section 21
of the Financial Services and Markets Act 2000, or FSMA) received
by it in connection with the issue or sale of the shares in
circumstances in which Section 21(1) of the FSMA does not apply to
the issuer; and
b)
it
has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the shares
in, from or otherwise involving the United
Kingdom.
Canada
The shares of our Common Stock may be sold only to
purchasers purchasing, or deemed to be purchasing, as principal
that are accredited investors, as defined in National Instrument
45-106 Prospectus
Exemptions or subsection
73.3(1) of the Securities
Act(Ontario), and are permitted
clients, as defined in National Instrument
31-103 Registration Requirements,
Exemptions and Ongoing Registrant Obligations. Any resale of the shares of our Common Stock
must be made in accordance with an exemption from, or in a
transaction not subject to, the prospectus requirements of
applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may
provide a purchaser with remedies for rescission or damages if the
prospectus (including any amendment thereto) contains a
misrepresentation, provided that the remedies for rescission or
damages are exercised by the purchaser within the time limit
prescribed by the securities legislation of the purchaser's
province or territory. The purchaser should refer to any applicable
provisions of the securities legislation of the purchaser's
province or territory for particulars of these rights or consult
with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33-105 Underwriting
Conflicts (“NI
33-105”), the underwriters are not required to comply with
the disclosure requirements of NI 33-105 regarding underwriter
conflicts of interest in connection with this
offering.
Switzerland
The
shares may not be publicly offered in Switzerland and will not be
listed on the SIX Swiss Exchange, or SIX, or on any other stock
exchange or regulated trading facility in Switzerland. This
document has been prepared without regard to the disclosure
standards for issuance prospectuses under art. 652a or art. 1156 of
the Swiss Code of Obligations or the disclosure standards for
listing prospectuses under art. 27 ff. of the SIX Listing Rules or
the listing rules of any other stock exchange or regulated trading
facility in Switzerland. Neither this document, nor any other
offering or marketing material relating to the shares or this
offering, may be publicly distributed or otherwise made publicly
available in Switzerland. Neither this document nor any other
offering or marketing material relating to this offering, the
Company, the shares has been or will be filed with or approved by
any Swiss regulatory authority. In particular, this document will
not be filed with, and the offer of shares will not be supervised
by, the Swiss Financial Market Supervisory Authority FINMA, or
FINMA, and the offer of shares has not been and will not be
authorized under the Swiss Federal Act on Collective Investment
Schemes, or CISA. The investor protection afforded to acquirers of
interests in collective investment schemes under the CISA does not
extend to acquirers of shares.
Hong Kong
The
shares may not be offered or sold by means of any document other
than (i) in circumstances that do not constitute an offer to
the public within the meaning of the Companies Ordinance (Cap.32,
Laws of Hong Kong), or (ii) to “professional
investors” within the meaning of the Securities and Futures
Ordinance (Cap.571, Laws of Hong Kong) and any rules made
thereunder, or (iii) in other circumstances that do not result
in the document being a “prospectus” within the meaning
of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no
advertisement, invitation or document relating to the shares may be
issued or may be in the possession of any person for the purpose of
issue (in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed or
read by, the public in Hong Kong (except if permitted to do so
under the laws of Hong Kong) other than with respect to shares that
are or are intended to be disposed of only to persons outside Hong
Kong or only to “professional investors” within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws of
Hong Kong) and any rules made thereunder.
Singapore
This prospectus has not been registered as a
prospectus with the Monetary Authority of Singapore. Accordingly,
this prospectus and any other document or material in connection
with the offer or sale, or invitation for subscription or purchase,
of the shares may not be circulated or distributed, nor may the
shares be offered or sold, or be made the subject of an invitation
for subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore, or the SFA, (ii) to a relevant
person, or any person pursuant to Section 275(1A), and in
accordance with the conditions, specified in Section 275 of the SFA or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the
SFA.
Where
the shares are subscribed or purchased under Section 275 by a
relevant person that is: (a) a corporation (which is not an
accredited investor) the sole business of which is to hold
investments and the entire share capital of which is owned by one
or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor)
whose sole purpose is to hold investments and each beneficiary is
an accredited investor, shares, debentures and units of shares and
debentures of that corporation or the beneficiaries’ rights
and interest in that trust shall not be transferable for six months
after that corporation or that trust has acquired the shares under
Section 275 except: (1) to an institutional investor
under Section 274 of the SFA or to a relevant person, or any
person pursuant to Section 275(1A), and in accordance with the
conditions, specified in Section 275 of the SFA;
(2) where no consideration is given for the transfer; or
(3) by operation of law.
Japan
The
securities have not been and will not be registered under the
Financial Instruments and Exchange Law of Japan, or the Financial
Instruments and Exchange Law, and each underwriter has agreed that
it will not offer or sell any securities, directly or indirectly,
in Japan or to, or for the benefit of, any resident of Japan (which
term, as used in this prospectus means any person resident in
Japan, including any corporation or other entity organized under
the laws of Japan) or to others for re-offering or
resale, directly or indirectly, in Japan or to a resident of Japan,
except pursuant to an exemption from the registration requirements
of, and otherwise in compliance with, the Financial Instruments and
Exchange Law and any other applicable laws, regulations and
ministerial guidelines of Japan.
United Arab Emirates
This
prospectus relates to an Exempt Offer in accordance with the
Offered Securities Rules of the Dubai Financial Services Authority,
or DFSA. This prospectus is intended for distribution only to
persons of a type specified in the Offered Securities Rules of the
DFSA. It must not be delivered to, or relied on by, any other
person. The DFSA has no responsibility for reviewing or verifying
any documents in connection with Exempt Offers. The DFSA has not
approved this prospectus nor taken steps to verify the information
set forth herein and has no responsibility for this prospectus. The
shares to which this prospectus relates may be illiquid and/or
subject to restrictions on their resale. Prospective purchasers of
the shares offered should conduct their own due diligence on the
shares. If you do not understand the contents of this prospectus,
you should consult an authorized financial advisor.
Certain
legal matters will be passed upon for us by Baker & Hostetler,
LLP, Columbus, Ohio. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Duane Morris
LLP, New York, New York.
EXPERTS
The
financial statements as of December 31, 2018 and 2017, and for the
years then ended, included in this Prospectus have been so included
in reliance on the report of BPM LLP, an independent registered
public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement
on Form S-1 (File Number 333-233303) under
the Securities Act with respect to the common stock we are offering
by this prospectus. This prospectus does not contain all of the
information included in the registration statement. For further
information pertaining to us and our common stock, you should refer
to the registration statement and to its exhibits. Whenever we make
reference in this prospectus to any of our contracts, agreements or
other documents, the references are not necessarily complete, and
you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other
document.
Upon
the completion of the offering, we will be subject to the
informational requirements of the Exchange Act and will file
annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read our SEC filings, including
the registration statement, at the SEC’s website at
www.sec.gov. You may also read and copy any document we file with
the SEC at its public reference facility at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. We also maintain
a website at http://www.monopartx.com. Upon completion of the
offering, you may access, free of charge, our annual reports
on Form 10-K, quarterly reports
on Form 10-Q, current reports
on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC.
You may
also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at
100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on
the operation of the public reference facilities.
INCORPORATION OF DOCUMENTS BY REFERENCE
The
SEC allows us to incorporate by reference the information we file
with it, which means that we can disclose important information to
you by referring you to another document that we have filed
separately with the SEC. You should read the information
incorporated by reference because it is an important part of this
prospectus. Information in this prospectus supersedes information
incorporated by reference that we filed with the SEC prior to the
date of this prospectus, while information that we file later with
the SEC will automatically update and supersede the information in
this prospectus. We incorporate by reference into this prospectus
and the registration statement of which this prospectus is a part
the information and documents listed below that we have filed with
the SEC (Commission File No. 000-55866):
●
Our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,
filed with the SEC on August 8, 2019;
●
our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2019,
filed with the SEC on May 10, 2019;
●
our
Information Statement regarding our Annual Meeting of Stockholders
on June 27, 2019, on DEF14C, filed with the SEC on May 22,
2019;
●
our
Annual Report on Form 10-K for the year ended December 31, 2018,
filed with the SEC on February 26, 2019; and
●
our
Current Reports on Form 8-K, filed with the SEC on June 27, 2019,
June 5, 2018, and July 2, 2018, to the extent the information in
such reports is filed and not furnished.
We
also incorporate by reference any future filings (other than
Current Reports furnished under Item 2.02 or Item 7.01 of
Form 8-K and exhibits filed on such form that are related to such
items unless such Form 8-K expressly provides to the contrary)
made with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, including those made after the date of
the initial filing of the registration statement of which this
prospectus is a part and prior to effectiveness of such
registration statement, until we file a post-effective amendment
that indicates the termination of the offering of the common stock
made by this prospectus and will become a part of this prospectus
from the date that such documents are filed with the SEC.
Information in such future filings updates and supplements the
information provided in this prospectus. Any statements in any such
future filings will automatically be deemed to modify and supersede
any information in any document we previously filed with the SEC
that is incorporated or deemed to be incorporated herein by
reference to the extent that statements in the later filed document
modify or replace such earlier statements.
We
will furnish without charge to each person, including any
beneficial owner, to whom a prospectus is delivered, upon written
or oral request, a copy of any or all of the documents incorporated
by reference into this prospectus but not delivered with the
prospectus, including exhibits that are specifically incorporated
by reference into such documents. You should direct any requests
for documents to Monopar Therapeutics, Inc., Attention: Corporate
Secretary, 1000 Skokie Blvd., Suite 350, Wilmette, IL 60091. Our
phone number is (847) 388-0349. You may also view the documents
that we file with the SEC and incorporate by reference in this
Prospectus on our corporate website at www.monopartx.com. The
information on our website is not incorporated by reference and is
not a part of this Prospectus.
Monopar Therapeutics Inc.
Financial Statements
June 30, 2019
Unaudited
INDEX TO FINANCIAL
STATEMENTS
|
|
Page
|
Condensed
Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31,
2018
|
|
F-2
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss for
the Three and Six
Months
Ended June 30, 2019 and 2018 (Unaudited)
|
|
F-3
|
Condensed
Consolidated Statements of Stockholders’ Equity from January
1, 2018 to June 30,
2019
(Unaudited)
|
|
F-4
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended June
30, 2019 and
2018
(Unaudited)
|
|
F-5
|
Notes
to Unaudited Condensed Consolidated Financial
Statements
|
|
F-6 to
F-18
|
F-1
Monopar Therapeutics Inc.
Condensed Consolidated
Balance Sheets
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018*
|
Assets
|
|
(unaudited)
|
|
|
Current assets:
|
|
|
|
|
Cash
and cash equivalents
|
|
$ 5,129,828
|
|
$ 6,892,772
|
Deferred
offering costs
|
|
371,113
|
|
344,936
|
Other
current assets
|
|
94,149
|
|
80,247
|
Total
current assets
|
|
5,595,090
|
|
7,317,955
|
|
|
|
|
|
Total
assets
|
|
$ 5,595,090
|
|
$ 7,317,955
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts
payable, accrued expenses and other current
liabilities
|
|
$ 468,272
|
|
$ 399,551
|
Total
current liabilities
|
|
468,272
|
|
399,551
|
|
|
|
|
|
Total
liabilities
|
|
468,272
|
|
399,551
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
Common
stock, par value of $0.001 per share, 40,000,000 shares authorized,
9,291,421 shares
issued and outstanding at June 30, 2019 and December 31,
2018
|
|
9,291
|
|
9,291
|
Additional
paid-in capital
|
|
29,058,630
|
|
28,567,221
|
Accumulated
other comprehensive loss
|
|
(3,456)
|
|
(2,396)
|
Accumulated
deficit
|
|
(23,937,647)
|
|
(21,655,712)
|
Total
stockholders’ equity
|
|
5,126,818
|
|
6,918,404
|
Total
liabilities and stockholders’ equity
|
|
$ 5,595,090
|
|
$ 7,317,955
|
*
Derived from the Company’s audited consolidated financial
statements.
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
F-2
Monopar Therapeutics Inc.
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Research
and development
|
329,294
|
|
492,647
|
|
1,164,894
|
|
949,788
|
General
and administrative
|
602,815
|
|
347,350
|
|
1,174,524
|
|
787,469
|
Total
operating expenses
|
932,109
|
|
839,997
|
|
2,339,418
|
|
1,737,257
|
Loss
from operations
|
(932,109)
|
|
(839,997)
|
|
(2,339,418)
|
|
(1,737,257)
|
Other income:
|
|
|
|
|
|
|
|
Interest
income
|
26,409
|
|
19,058
|
|
57,483
|
|
39,970
|
Net loss
|
(905,700)
|
|
(820,939)
|
|
(2,281,935)
|
|
(1,697,287)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
1,067
|
|
(1,579)
|
|
(1,060)
|
|
(1,579)
|
Comprehensive loss
|
$
(904,633)
|
|
$
(822,518)
|
|
$
(2,282,995)
|
|
$
(1,698,866)
|
Net loss per share:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
(0.10)
|
|
$
(0.09)
|
|
$
(0.25)
|
|
$
(0.18)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
Basic and diluted
|
9,291,421
|
|
9,291,421
|
|
9,291,421
|
|
9,291,421
|
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
F-3
Monopar Therapeutics Inc.
Condensed Consolidated Statements of Stockholders’
Equity
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Other Comprehensive Loss
|
|
Total Stockholders’ Equity
|
Balance at January 1, 2018
|
|
9,291,421
|
|
$ 9,291
|
|
$ 28,037,889
|
|
$ (18,427,780)
|
|
$ —
|
|
$ 9,619,400
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
114,526
|
|
—
|
|
—
|
|
114,526
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(876,347)
|
|
—
|
|
(876,347)
|
Balance at March 31, 2018
|
|
9,291,421
|
|
9,291
|
|
28,152,415
|
|
(19,304,127)
|
|
|
|
8,857,579
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
88,570
|
|
—
|
|
—
|
|
88,570
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(820,940)
|
|
—
|
|
(820,940)
|
Other
comprehensive gain (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,579)
|
|
(1,579)
|
Balance at June 30, 2018
|
|
9,291,421
|
|
9,291
|
|
28,240,985
|
|
(20,125,067)
|
|
(1,579)
|
|
8,123,630
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
93,244
|
|
—
|
|
—
|
|
93,244
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(640,184)
|
|
—
|
|
(640,184)
|
Other
comprehensive gain (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(806)
|
|
(806)
|
Balance at September 30, 2018
|
|
9,291,421
|
|
9,291
|
|
28,334,229
|
|
(20,765,251)
|
|
(2,385)
|
|
7,575,884
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
232,992
|
|
—
|
|
—
|
|
232,992
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(890,461)
|
|
—
|
|
(890,461)
|
Other
comprehensive gain (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(11)
|
|
(11)
|
Balance at December 31, 2018
|
|
9,291,421
|
|
9,291
|
|
28,567,221
|
|
(21,655,712)
|
|
(2,396)
|
|
6,918,404
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
233,776
|
|
—
|
|
—
|
|
233,776
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(1,376,235)
|
|
—
|
|
(1,376,235)
|
Other
comprehensive gain (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,127)
|
|
(2,127)
|
Balance at March 31, 2019
|
|
9,291,421
|
|
9,291
|
|
28,800,997
|
|
(23,031,947)
|
|
(4,523)
|
|
5,773,818
|
Non-cash
stock compensation
|
|
—
|
|
—
|
|
257,633
|
|
—
|
|
—
|
|
257,633
|
Net
loss
|
|
—
|
|
—
|
|
—
|
|
(905,700)
|
|
—
|
|
(905,700)
|
Other
comprehensive gain (loss)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,067
|
|
1,067
|
Balance at June 30, 2019
|
|
9,291,421
|
|
$ 9,291
|
|
$ 29,058,630
|
|
$ (23,937,647)
|
|
$ (3,456)
|
|
$ 5,126,818
|
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
F-4
Monopar Therapeutics Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
|
|
Six months ended June 30,
|
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
|
$ (2,281,935)
|
|
$ (1,697,287)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Stock-based
compensation (non-cash)
|
|
491,409
|
|
203,096
|
Changes in operating assets and liabilities, net
|
|
|
|
|
Other
current assets
|
|
(13,902)
|
|
(78,795)
|
Accounts
payable, accrued expenses and other current
liabilities
|
|
68,721
|
|
11,274
|
Net
cash used in operating activities
|
|
(1,735,707)
|
|
(1,561,712)
|
Cash flows from financing activities:
|
|
|
|
|
Deferred
offering costs
|
|
(26,177)
|
|
-
|
Net
cash used in financing activities
|
|
(26,177)
|
|
-
|
Effect
of exchange rates on cash, cash equivalents, and restricted
cash
|
|
(1,060)
|
|
(1,572)
|
Net
decrease in cash, cash equivalents, and restricted
cash
|
|
(1,762,944)
|
|
(1,563,284)
|
Cash, cash equivalents and restricted cash at beginning of
period
|
|
6,892,772
|
|
9,781,925
|
Cash, cash equivalents and restricted cash at end of
period
|
|
$ 5,129,828
|
|
$ 8,218,641
|
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
F-5
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
Note
1 - Nature of Business and Liquidity
Nature of Business
Monopar
Therapeutics Inc. (“Monopar” or the
”Company”) is an emerging biopharmaceutical company
focused on developing innovative drugs and drug combinations to
improve clinical outcomes in cancer patients. Monopar currently has
three compounds in development: Validive® (clonidine
mucobuccal tablet; clonidine MBT), a Phase 3-ready, first-in-class
mucoadhesive buccal anti-inflammatory tablet for the prevention and
treatment of radiation induced severe oral mucositis
(“SOM”) in oropharyngeal cancer patients; camsirubicin (generic name
for MNPR-201, GPX-150; 5-imino-13-deoxydoxorubicin), a proprietary
Phase 2 clinical stage topoisomerase II-alpha targeted analog of doxorubicin engineered
specifically to retain anticancer activity while minimizing toxic
effects on the heart; and MNPR-101 (formerly huATN-658), a pre-IND
stage humanized monoclonal antibody, which targets the urokinase
plasminogen activator receptor (“uPAR”), for the
treatment of advanced solid cancers.
The
Company was originally formed in the State of Delaware on December
5, 2014 as a limited liability company (“LLC”) and on
December 16, 2015 converted to a C Corporation in a tax-free
exchange at which time the Company effected a 1 for 10 reverse
stock split. All references to preferred stock and common stock
authorized take into account the 1 for 10 reverse stock split. In
March 2017, the Company’s Series A Preferred Stock and Series
Z Preferred Stock converted into common stock at a conversion rate
of 1.2 for 1 and 1 for 1, respectively, which eliminated all shares
of Series A Preferred Stock and Series Z Preferred Stock along with
a concurrent common stock split of 70 for 1. All references to
common stock authorized, issued and outstanding and common stock
options take into account the 70 for 1 stock split.
Liquidity
The
Company has incurred an accumulated deficit of approximately $23.9
million as of June 30, 2019. To date, the Company has primarily
funded its operations with the net proceeds from private placements
of convertible preferred stock and of common stock and from the
cash provided in the camsirubicin asset purchase transaction.
Management believes that currently available resources will provide
sufficient funds to enable the Company to meet its minimum
obligations through September 2020. The Company’s ability to
fund its future operations, including the clinical development of
Validive and camsirubicin, is dependent primarily upon its ability
to execute its business strategy, to obtain additional funding
and/or to execute collaboration research transactions. There can be
no certainty that future financing or collaborative research
transactions will occur.
Note 2 - Significant Accounting Policies
Basis of Presentation
These
condensed consolidated financial statements include the financial
results of Monopar Therapeutics Inc., its French branch, its
wholly-owned French subsidiary, Monopar Therapeutics, SARL, and its
wholly-owned Australian subsidiary, Monopar Therapeutics Pty Ltd
and have been prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) and
include all disclosures required by GAAP for interim financial
reporting. All intercompany accounts have been eliminated. The
principal accounting policies applied in the preparation of these
condensed consolidated financial statements are set out below and
have been consistently applied in all periods presented. The
Company has been primarily involved in performing research
activities, developing product candidates, and raising capital to
support and expand these activities.
Certain
reclassifications have been made to the Company’s condensed
consolidated financial statements for the three and six months
ended June 30, 2018 to conform to the three and six months ended
June 30, 2019 presentation. The reclassifications had no impact on
the Company’s comprehensive loss, total assets, or
stockholders’ equity.
F-6
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
In
the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all normal, recurring
adjustments necessary to present fairly the Company’s
condensed consolidated financial position as of June 30, 2019 and
as of December 31, 2018, the Company’s condensed consolidated
results of operations and comprehensive loss for the three and six
months ended June 30, 2019 and 2018, and the Company’s
condensed consolidated cash flows for the six months ended June 30,
2019 and 2018. The condensed consolidated results of operations and
cash flows for the periods presented are not necessarily indicative
of the consolidated results of operations or cash flows which may
be reported for the remainder of 2019 or for any future
period. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP
have been condensed or omitted. The accompanying unaudited
interim condensed consolidated financial statements should be read
in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 2018, included in the
Company’s Annual Report on Form 10-K filed with the United
States Securities and Exchange Commission (the “SEC”)
on February 26, 2019.
Functional Currency
The
Company's consolidated functional currency is the U.S. Dollar. The
Company's Australian subsidiary and French subsidiary use the
Australian Dollar and European Euro, respectively, as their
functional currency. At each quarter end, each foreign subsidiary's
balance sheets are translated into U.S. Dollars based upon the
quarter-end exchange rate, while their statements of operations and
comprehensive loss are translated into U.S. Dollars based upon an
average exchange rate during the period.
Comprehensive Loss
Comprehensive loss
represents net loss plus any gains or losses not reported in the
condensed consolidated statements of operations, such as foreign
currency translations gains and losses that are typically reflected
on a Company’s condensed consolidated statements of
stockholders’ equity.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and reported amounts of revenues
and expenses in the condensed consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
Going Concern Assessment
The
Company adopted Accounting Standards Updates (“ASU”)
2014-15, Disclosure of
Uncertainties about an Entity’s Ability to Continue as a
Going Concern, which the Financial Accounting Standards
Board (“FASB”) issued to provide guidance on
determining when and how reporting companies must disclose
going-concern uncertainties in their financial statements. The ASU
requires management to perform interim and annual assessments of an
entity’s ability to continue as a going concern within one
year of the date of issuance of the entity’s financial
statements (or within one year after the date on which the
financial statements are available to be issued, when applicable).
Further, a company must provide certain disclosures if there is
“substantial doubt about the entity’s ability to
continue as a going concern.” In July 2019, the Company
analyzed its minimum cash requirements through September 2020 and
has determined that, based upon the Company’s current
available cash, the Company has no substantial doubt about its
ability to continue as a going concern.
Cash Equivalents
The
Company considers all highly liquid investments purchased with an
original maturity of 90 days or less to be cash equivalents. Cash
equivalents as of June 30, 2019 and December 31, 2018 consist
entirely of a money market account.
F-7
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
Deferred Offering Costs
Deferred offering
costs represent legal and auditing expenses related to fundraising
efforts that have not yet been concluded.
Prepaid Expenses
Prepayments are
expenditures for goods or services before the goods are used or the
services are received and are charged to operations as the benefits
are realized. Prepaid expenses include insurance premiums and
software costs that are expensed monthly over the life of the
contract.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration
of credit risk consist of cash and cash equivalents. As of June 30,
2019 and December 31, 2018, the Company maintained cash and cash
equivalents at two financial institutions. Balances at one
financial institution for both periods presented were in excess of
the $250,000 Federal Deposit Insurance Corporation
(“FDIC”) insurable limit.
Fair Value of Financial Instruments
For
financial instruments consisting of cash and cash equivalents,
prepaid expenses, deferred offering costs, other current assets,
accounts payable, accrued expenses and other current liabilities,
the carrying amounts are reasonable estimates of fair value due to
their relatively short maturities.
The Company adopted Accounting Standard
Codification (“ASC”) 820, Fair Value Measurements and
Disclosures, as amended,
addressing the measurement of the fair value of financial assets
and financial liabilities. Under this standard, fair value is
defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., the “exit price”) in an orderly
transaction between market participants at the measurement
date.
In
determining fair values of all reported assets and liabilities that
represent financial instruments, the Company uses the carrying
market values of such amounts. The
standard establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs reflect
assumptions market participants would use in pricing an asset or
liability based on market data obtained from independent sources.
Unobservable inputs reflect a
reporting entity’s pricing an asset or liability developed based on the best information available
under the circumstances. The fair value hierarchy consists
of the following three levels:
Level 1 - instrument valuations are
obtained from real-time quotes for transactions in active exchange
markets involving identical assets.
Level 2 - instrument valuations are
obtained from readily-available pricing sources for comparable
instruments.
Level 3 - instrument valuations are
obtained without observable market values and require a high-level
of judgment to determine the fair value.
Determining which
category an asset or liability falls within the hierarchy requires
significant judgment. The Company evaluates its hierarchy
disclosures each reporting period. There were no transfers between
Level 1, 2 or 3 of the fair value hierarchy during the three and
six months ended June 30, 2019 and the year ended December 31,
2018. The following table presents the assets and liabilities
recorded that are reported at fair value on our condensed
consolidated balance sheets on a recurring basis. No values were
recorded in Level 2 or Level 3 for the three and six months ended
June 30, 2019 and the year ended December 31, 2018.
F-8
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
Assets and Liabilities
Measured at Fair Value on a Recurring Basis
June
30, 2019
|
|
|
Assets
|
|
|
Cash
equivalents(1)
|
$5,066,830
|
$5,066,830
|
Total
|
$5,066,830
|
$5,066,830
|
(1)
Cash equivalents
represent the fair value of the Company’s investment in a
money market account at June 30, 2019.
December
31, 2018
|
|
|
Assets
|
|
|
Cash
equivalents(1)
|
$6,788,333
|
$6,788,333
|
Total
|
$6,788,333
|
$6,788,333
|
(1)
Cash equivalents
represent the fair value of the Company’s investment in a
money market account at December 31, 2018.
Net Loss per Share
Net
loss per share for the three and six months ended June 30, 2019 is
calculated by dividing net loss by the weighted-average shares of
common stock outstanding during the period. Diluted net loss per
share for the three and six months ended June 30, 2019 and 2018 is
calculated by dividing net loss by the weighted-average shares of
the sum of a) common stock outstanding and b) potential dilutive
shares of common stock (such as stock options and warrants)
outstanding during the period. As of June 30, 2019, potentially
dilutive securities included stock options to purchase up to
1,105,896 shares of the Company’s common stock. As of June
30, 2018, potentially dilutive securities included stock options to
purchase up to 661,429 shares of the Company’s common
stock. For all periods
presented, potentially dilutive securities are excluded from the
computation of fully diluted net loss per share as their effect is
anti-dilutive.
Research and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of R&D expenses include salaries and benefits
paid to the Company’s R&D staff, fees paid to consultants
and to the entities that conduct certain R&D activities on the
Company’s behalf and materials and supplies which are used in
R&D activities during the reporting period.
The
Company accrues and expenses the costs for clinical trial
activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study
in accordance with agreements established with contract research
organizations and clinical trial sites. The Company determines the
estimates through discussions with internal clinical personnel and
external service providers as to progress or stage of completion of
trials or services and the agreed upon fee to be paid for such
services. Costs of setting up clinical trial sites for
participation in the trials are expensed immediately as R&D
expenses. Clinical trial site costs related to patient screening
and enrollment are accrued as patients are screened/entered into
the trial. During the three and six months ended June 30, 2019 and
2018, the Company had no clinical trials in progress.
In-process Research and Development
In-process research
and development (“IPR&D”) expense represent the
costs to acquire technologies to be used in research and
development that have not reached technological feasibility, have
no alternative future uses and thus are expensed as incurred.
IPR&D expense also includes upfront license fees and milestones
paid to collaborators for technologies with no alternative
use.
F-9
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
Collaborative Arrangements
The
Company and its future collaborative partners would be active
participants in collaborative arrangements and all parties would be
exposed to significant risks and rewards depending on the technical
and commercial success of the activities. Contractual payments to
the other parties in collaboration agreements and costs incurred by
the Company when the Company is deemed to be the principal
participant for a given transaction are recognized on a gross basis
in R&D expenses. Royalties and license payments are recorded as
earned.
During
the three and six months ended June 30, 2019 and 2018, no
milestones were met and no royalties were earned, therefore, the
Company did not pay or accrue/expense any milestone or royalty
payments.
Licensing Agreements
The
Company has various agreements licensing technology utilized in the
development of its product or technology programs. The licenses
contain success milestone obligations and royalties on future
sales. During the three and six months ended June 30, 2019 and
2018, no milestones were met and no royalties were earned,
therefore, the Company did not pay or accrue/expense any milestone
or royalty payments under any of its license
agreements.
Patent Costs
The
Company expenses costs relating to issued patents and patent
applications, including costs relating to legal, renewal and
application fees, as a component of general and administrative
expenses in its condensed consolidated statements of operations and
comprehensive loss.
Leases
Effective January
1, 2019, the Company has adopted ASU 2016-02, Leases, which has been amended by ASU
2018-10, Codification Improvements
to Topic 842, Leases, which for operating leases, requires a
lessee to recognize a right-of-use asset and a lease liability,
initially measured at the present value of the lease payments, in
its balance sheet. ASU 2016-02 is intended to improve financial
reporting of leasing transactions by requiring organizations that
lease assets to recognize assets and liabilities for the rights and
obligations created by leases on the balance sheet.
As a
result, the Company has recorded on its condensed consolidated
balance sheet the unamortized present
value of its lease payments as (a) a lease liability in
other current liabilities and (b) a right-of-use asset in other
current assets.
Income Taxes
From
December 2014 to December 16, 2015, the Company was an LLC taxed as
a partnership under the Internal Revenue Code, during which period
the members separately accounted for their pro-rata share of
income, deductions, losses, and credits of the Company. On December
16, 2015, the Company converted from an LLC to a C Corporation. On
December 16, 2015, the Company began using an asset and liability
approach for accounting for deferred income taxes, which requires
recognition of deferred income tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in its financial statements, but have not been reflected
in its taxable income. Estimates and judgments are required in the
calculation of certain tax liabilities and in the determination of
the recoverability of certain deferred income tax assets, which
arise from temporary differences and carry forwards. Deferred
income tax assets and liabilities are measured using the currently
enacted tax rates that apply to taxable income in effect for the
years in which those tax assets and liabilities are expected to be
realized or settled.
F-10
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
The
Company regularly assesses the likelihood that its deferred income
tax assets will be realized from recoverable income taxes or
recovered from future taxable income. To the extent that the
Company believes any amounts are more likely than not to be
realized, the Company records a valuation allowance to reduce the
deferred income tax assets. In the event the Company determines
that all or part of the net deferred tax assets are not realizable
in the future, an adjustment to the valuation allowance would be
charged to earnings in the period such determination is made.
Similarly, if the Company subsequently realizes deferred income tax
assets that were previously determined to be unrealizable are now
realizable, the respective valuation allowance would be reversed,
resulting in an adjustment to earnings in the period such
determination is made.
Internal Revenue
Code Section 382 provides that, after an ownership change, the
amount of a loss corporation’s net operating loss
(“NOL”) for any post-change year that may be offset by
pre-change losses shall not exceed the section 382 limitation for
that year. Because the Company will continue to raise equity in the
coming years, section 382 will limit the Company’s usage of
NOLs in the future.
Accounting
Standards Codification (“ASC”) 740, Income Taxes, requires that the tax
benefit of net operating losses, temporary differences, and credit
carryforwards be recorded as an asset to the extent that management
assesses that realization is "more likely than not." Realization of
the future tax benefits is dependent on the Company's ability to
generate sufficient taxable income within the carryforward period.
The Company has reviewed the positive and negative evidence
relating to the realizability of the deferred tax assets and has
concluded that the deferred tax assets are not more likely than not
to be realized with the exception of its U.S. Federal R&D tax
credits which will be utilized to reduce payroll taxes in future
periods. The Company intends to maintain the valuation allowance
until sufficient evidence exists to support its reversal. The
Company regularly reviews its tax positions. For a tax benefit to
be recognized, the related tax position must be more likely than
not to be sustained upon examination. Any amount recognized is
generally the largest benefit that is more likely than not to be
realized upon settlement. The Company’s policy is to
recognize interest and penalties related to income tax matters as
an income tax expense. For the three and six months ended June 30,
2019 and 2018, the Company did not have any interest or penalties
associated with unrecognized tax benefits.
The
Company is subject to U.S. Federal, Illinois and California income
taxes. Tax regulations within each jurisdiction are subject to the
interpretation of the related tax laws and regulations and require
significant judgment to apply. The Company was incorporated on
December 16, 2015 and is subject to U.S. Federal, state and local
tax examinations by tax authorities for the years ended December
31, 2017 and 2016 and for the short tax period December 16, 2015 to
December 31, 2015. The Company does not anticipate significant
changes to its current uncertain tax positions through June 30,
2019. The Company plans on filing its tax returns for the year
ended December 31, 2018 prior to the extended filing deadlines in
all jurisdictions.
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements with
employees, non-employee directors and consultants using a fair
value method, which requires the recognition of compensation
expense for costs related to all stock-based payments, including
stock options. The fair value method requires the Company to
estimate the fair value of stock-based payment awards on the date
of grant using an option pricing model.
Stock-based
compensation costs for options granted to employees and
non-employee directors are based on the fair value of the
underlying option calculated using the Black-Scholes option-pricing
model on the date of grant for stock options and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
estimating the future stock price volatility, forfeiture rates and
expected term. The expected volatility
rates are estimated based on the actual volatility of comparable
public companies over recent historical periods of the same length
as the expected term. The Company selected these companies
based on comparable characteristics, including market
capitalization, stage of development and with historical share
price information sufficient to meet the expected term (life) of
the stock-based awards. The expected term for options granted to
date is estimated using the simplified method. Forfeitures are
estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those
estimates. The Company has not paid dividends and does not
anticipate paying a cash dividend in the future vesting period
and,
F-11
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
accordingly, uses
an expected dividend yield of zero. The risk-free interest rate is
based on the rate of U.S. Treasury securities with maturities
consistent with the estimated expected term of the awards. Prior to
January 1, 2019, the measurement of consultant stock-based
compensation was subject to periodic adjustments as the underlying
equity instruments vest. Since January 1, 2019, consultant stock-based
compensation is valued on the grant date and is recognized
as an expense over the period in which services are
rendered.
Recent Accounting Pronouncements
In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement. The ASU modifies, and in certain cases
eliminates, the disclosure requirements on fair value measurements
in Topic 820. The
amendments in ASU No. 2018-13 are effective for all entities for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. Early adoption is permitted. An
entity is permitted to early adopt any removed or modified
disclosures upon issuance of ASU No. 2018-13 and delay adoption of
the additional disclosures until their effective date. The Company
is currently assessing the impact that adopting this new accounting
standard will have on its condensed consolidated financial
statements and footnote disclosures.
Note 3 - Capital Stock
On
December 16, 2015, the Company converted from an LLC to a C
Corporation at which time the Company effected a 1 for 10 reverse
stock split. All references to preferred stock and common stock
authorized take into account the 1 for 10 reverse stock split. In
March 2017, the Company’s Series A Preferred Stock and Series
Z Preferred Stock converted to common stock at a conversion rate of
1.2 for 1 and 1 for 1, respectively, along with a simultaneous
common stock split of 70 for 1 and the elimination all shares of
Series A Preferred Stock and Series Z Preferred Stock
(collectively, the “Conversion”). 100,000 shares of
Series Z Preferred Stock were converted into 7,000,000 shares of
common stock and 15,894 shares of Series A Preferred Stock were
converted into 1,335,079 shares of common stock. All references to
common stock authorized, issued and outstanding and common stock
options take into account the 70 for 1 stock split.
Holders
of the common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally
available therefor. Upon dissolution and liquidation of the
Company, holders of the common stock are entitled to a ratable
share of the net assets of the Company remaining after payments to
creditors of the Company. The holders of shares of common stock are
entitled to one vote per share for the election of directors and on
all other matters submitted to a vote of stockholders.
The
Company’s amended and restated certificate of incorporation
authorizes the Company to issue 40,000,000 shares of common stock
with a par value of $0.001 per share.
Contribution to Capital
In
August 2017, the Company’s then largest stockholder, Tactic
Pharma, LLC (“Tactic Pharma”), surrendered 2,888,727
shares of common stock back to the Company as a contribution to the
capital of the Company. This resulted at that time in reducing
Tactic Pharma’s ownership in Monopar from 79.5% to
69.9%.
Sales of Common Stock
Pursuant to an
active private placement memorandum, during the period from July 1,
2017 through September 30, 2017, Monopar sold 448,834 shares of
common stock at $6 per share for proceeds of approximately $2.7
million. This financing closed on September 30, 2017.
Issuance of Common Stock
In
August 2017, the Company issued 3,055,394 shares of its common
stock in exchange for cash and intellectual property related to
camsirubicin (MNPR-201).
F-12
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
As of
June 30, 2019, the Company had 9,291,421 shares of common stock
issued and outstanding. The Company no longer has any shares of
preferred stock authorized or outstanding.
In
April 2016, the Company adopted the 2016 Stock Incentive Plan and
the Company’s Board of Directors reserved 700,000 shares of
common stock for issuances under the plan (as adjusted subsequent
to the Conversion). In October 2017, the Company’s Board of
Directors voted to increase the stock option pool to 1,600,000
shares of common stock, which subsequently was approved by the
Company’s stockholders.
Note 4 - Stock Option Plan
In
April 2016, the Company’s Board of Directors and the
convertible preferred stockholders representing a majority of the
Company’s outstanding stock, approved the Amended and
Restated Monopar Therapeutics Inc. 2016 Stock Incentive Plan, as
amended (the “Plan”), allowing the Company to grant up
to an aggregate 700,000 shares of stock awards, stock options,
stock appreciation rights and other stock-based awards to
employees, directors and consultants. Concurrently, the Board of
Directors granted to certain Board members and the Company’s
acting chief financial officer stock options to purchase up to an
aggregate 273,000 shares of the Company’s common stock at an
exercise price of $0.001 par value based upon a third-party
valuation of the Company’s common stock.
In
December 2016, the Board of Directors granted to the
Company’s acting chief medical officer stock options to
purchase up to 7,000 shares of the Company’s common stock at
an exercise price of $0.001 par value based upon a third-party
valuation of the Company’s common stock.
In
February 2017, the Board of Directors granted to certain Board
members and to the Company’s acting chief financial officer
stock options to purchase up to an aggregate 275,520 shares of the
Company’s common stock at an exercise price of $0.001 par
value based upon a third-party valuation of the Company’s
common stock. In September 2017, the Board of Directors represented
by the designated Plan Administrator, granted options to purchase
up to 21,024 shares of common stock to each of the three new Board
members and in November 2017, the
Company granted options to purchase up to 40,000 shares of common
stock to an employee. These Board and employee options have
an exercise price of $6 per share based on the price per share at
which common stock was sold in the Company’s most recent
private offering.
In
January 2018, the Company granted
options to purchase up to 32,004 shares of common stock to its
acting chief medical officer, at an exercise price of $6 per
share based on the price per share at which common stock was sold
in the Company’s most recent private offering. In May 2018
and August 2018, the Company granted
options to two employees each to purchase up to 5,000 shares of
common stock, at an exercise price of $6 per share based on
the price per share at which common stock was sold in the
Company’s most recent private offering. Also in August 2018,
the Company granted stock
options to all four of its non-employee Board members, the
Company’s chief executive officer, chief scientific officer,
and chief financial officer to purchase up to an aggregate 425,300
shares of the Company’s common stock at an exercise price of $6 per share based
on the price per share at which common stock was sold in the
Company’s most recent private offering; vesting of such
options commenced on October 1, 2018.
In
December 2018, the Company granted options to purchase up to 20,000
shares of common stock to its acting chief medical officer, at an
exercise price of $6 per share based on the price per share at
which common stock was sold in the Company’s most recent
private offering. Vesting of such options commenced on January 1,
2019.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option shall be determined by the Plan
Administrator, except that the per share exercise price shall be no
less than 100% of the fair market value per share on the grant
date. Fair market value is established by the Company’s Board
of Directors, using third-party valuation reports and recent
financings. Options generally expire after ten years.
F-13
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
Stock option activity under
the Plan was as follows:
|
|
|
|
Options Outstanding
|
|
|
Options Available
|
|
Number ofOptions
|
|
Weighted-Average Exercise Price
|
Balances at January 1, 2018
|
|
941,408
|
|
658,592
|
|
$ 0.94
|
Granted(1)
|
|
(487,304)
|
|
487,304
|
|
6.00
|
Forfeited(2)
|
|
40,000
|
|
(40,000)
|
|
6.00
|
Exercised
|
|
—
|
|
—
|
|
—
|
Balances at December 31, 2018
|
|
494,104
|
|
1,105,896
|
|
2.99
|
Granted
|
|
-
|
|
-
|
|
-
|
Forfeited
|
|
-
|
|
-
|
|
-
|
Exercised
|
|
—
|
|
—
|
|
—
|
Balances at June 30, 2019
|
|
494,104
|
|
1,105,896
|
|
2.99
|
(1)
32,004 options vest
as follows: options to purchase up to 12,000 shares of common stock
vest on the grant date, options to purchase up to 1,667 shares of
common stock vest on the 1st of each month thereafter. 5,000
options vest 6/48ths on the grant date and 1/48th per month
thereafter. 5,000 options vest 6/48ths on the six-month anniversary
of grant date and 1/48th per month thereafter. 320,900 options vest
6/51 at the six-month anniversary of vesting commencement date and
1/51 per month thereafter, with vesting commencing on October 1,
2018. 104,400 options vest quarterly over 5 quarters, with the
first quarter commenced on October 1, 2018. 20,000 options vest as follows:
options to purchase up to 1,667 shares of common stock vest on
January 31, 2019 and the last day of each month
thereafter.
(2)
Forfeited options
resulted from an employee termination.
A
summary of options outstanding as of June 30, 2019 is shown
below:
Exercise Prices
|
|
Number of Shares subject to Options Outstanding
|
|
Weighted Average Remaining Contractual Term
|
|
Number of Shares Subject to Options Fully Vested and
Exercisable
|
|
Weighted Average Remaining Contractual Term
|
$0.001
|
|
555,520
|
|
7.2 years
|
|
440,720
|
|
7.1 years
|
6.00
|
|
550,376
|
|
9.0 years
|
|
175,212
|
|
8.9 years
|
|
|
1,105,896
|
|
|
|
615,932
|
|
|
During
the three months ended June 30, 2019 and 2018, the Company
recognized $164,600 and $26,362, respectively, of employee and
non-employee director stock-based compensation expense as general
and administrative expenses and $72,324 and $36,978, respectively,
as research and development expenses. During the six months ended
June 30, 2019 and 2018, the Company recognized $315,326 and
$52,514, respectively, of employee and non-employee director
stock-based compensation expense as general and administrative
expenses and $134,665 and $76,726, respectively, as research and
development expenses. The stock-based compensation expense is
allocated on a departmental basis, based on the classification of
the option holder. No income tax benefits have been recognized in
the condensed consolidated statements of operations and
comprehensive loss for stock-based compensation
arrangements.
F-14
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
The
Company recognizes as an expense the fair value of options granted
to persons who are neither employees nor non-employee directors.
Stock-based compensation expense for consultants which was recorded
as research and development expense for the three and six months
ended June 30, 2019 was $20,708 and $41,418, respectively.
Stock-based compensation expense for consultants which was recorded
as research and development expense for the three and six months
ended June 30, 2018 was $25,230 and $73,856,
respectively.
The
fair value of options granted from inception to June 30, 2019 was
based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 1.2% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date was
estimated using the simplified method. There were no stock option
grants during the three and six months ended June 30, 2019. For the
three and six months ended June 30, 2018 the weighted average grant
date fair value was $3.30 per share. For the three months ended
June 30, 2019 and 2018, the fair value of shares vested was
$349,409 and $79,310, respectively. For the six months ended June
30, 2019 and 2018, the fair value of shares vested was $483,846 and
$145,884, respectively. At June 30, 2019, the aggregate intrinsic
value of outstanding stock options was approximately $3.3 million
of which approximately $2.6 million was vested and approximately
$0.7 million is expected to vest and the weighted average exercise
price in aggregate was $2.99 which includes $1.71 for fully vested
stock options and $4.59 for stock options expected to vest. At June
30, 2019, the unamortized unvested balance of stock-based
compensation was approximately $1.8 million to be amortized over
2.6 years.
Note 5 - Development and Collaboration Agreements
Onxeo S.A.
In June
2016, the Company executed an option and license agreement with
Onxeo S.A. (“Onxeo”), a public French company, which
gave Monopar the exclusive option to license (on a world-wide
exclusive basis) Validive to pursue treating severe oral mucositis
in patients undergoing chemoradiation treatment for head and neck
cancers. The pre-negotiated Onxeo license agreement for Validive as
part of the option agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. On September 8, 2017, the
Company exercised the license option, and therefore paid Onxeo the
$1 million fee under the option and license agreement.
Under
the agreement, the Company is required to pay royalties to Onxeo on
a product-by-product and country-by-country basis until the later
of (1) the date when a given product is no longer within the scope
of a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever the Company’s royalty payment
obligations with respect to such product have expired. The
agreement may also be terminated early for cause if either the
Company or Onxeo materially breach the agreement, or if either the
Company or Onxeo become insolvent. The Company may also choose to
terminate the agreement, either in its entirety or as to a certain
product and a certain country, by providing Onxeo with advance
notice.
The
Company plans to internally develop Validive with the near-term
goal of commencing a Phase 3 clinical development program, which,
if successful, may allow the Company to apply for marketing
approval within the next
F-15
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
several
years. The Company will need to raise significant funds to support
the further development of Validive. As of June 30, 2019, the
Company had not reached any of the pre-specified milestones and has
not been required to pay Onxeo any funds under this license
agreement other than the one-time license fee.
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 that could reach up to $14.925 million if
the Company achieves all milestones. The agreement does not require
the payment of sales royalties. There can be no assurance that the
Company will reach any milestones under the XOMA agreement. As of
June 30, 2019, the Company had not reached any milestones and has
not been required to pay XOMA Ltd. any funds under this license
agreement.
Note 6 - Related Party Transactions
In
March 2017, Tactic Pharma, the Company’s largest shareholder
at that time, wired $1 million to the Company in advance of the
sale of the Company’s common stock at $6 per share under a
private placement memorandum. In April, the Company issued to
Tactic Pharma 166,667 shares in exchange for the $1 million at $6
per share once the Company began selling stock to unaffiliated
parties under the private placement memorandum.
In
August 2017, Tactic Pharma surrendered 2,888,727 shares of common
stock back to the Company as a contribution to the capital of the
Company. This resulted in reducing Tactic Pharma’s ownership
in Monopar at that time from 79.5% to 69.9%.
In
August 2017, the Company executed definitive agreements with Gem
Pharmaceuticals, LLC (“Gem”), pursuant to which Tactic
Pharma and Gem formed a limited liability company, TacticGem LLC
(“TacticGem”). Tactic Pharma contributed 4,111,273
shares of its holdings in Monopar’s common stock to TacticGem
and Gem contributed cash and assets to TacticGem. TacticGem then
contributed cash and assets to the Company in exchange for stock.
The Gem Transaction is discussed in detail in the Company’s Annual Report on Form 10-K
filed with the SEC on February 26, 2019. As of June 30,
2019, Tactic Pharma beneficially owned 46% of Monopar’s
common stock, and TacticGem owned 77% of Monopar’s common
stock.
During
the three and six months ended June 30, 2019 and 2018, the Company
was governed by four members of its Board of Directors, who were
Managers of the LLC prior to the Company’s conversion to a C
Corporation. The four former Managers are also current common
stockholders (owning approximately an aggregate 3% of the common
stock outstanding as of June 30, 2019). Three of the former
Managers are also Managing Members of Tactic Pharma. Monopar paid
or accrued payments for Managing Members of Tactic Pharma and the
Manager of CDR Pharma, LLC, which is the Manager of TacticGem the
following: Chandler D. Robinson, the Company’s Co-Founder,
Chief Executive Officer, common stockholder, board member of
Monopar as a C Corporation, Managing Member of Tactic Pharma,
former Manager of the predecessor LLC, and the Manager of CDR
Pharma, LLC: $110,788 and $107,500 for the three months ended June
30, 2019 and 2018, respectively; and $228,125 (including $7,500
bonus paid on March 8, 2019) and $214,999 for the six months ended
June 30, 2019 and 2018, respectively; Andrew P. Mazar, the
Company’s Co-Founder, Chief Scientific Officer, common
stockholder, board member of Monopar as a C Corporation, Managing
Member of Tactic Pharma and former Manager of the predecessor LLC:
$104,319 and $101,250 for the three months ended June 30, 2019 and
2018, respectively; and $213,350 (including $5,600 bonus paid on
March 8, 2019) and $202,500 for the six months ended June 30, 2019
and 2018, respectively. The Company also paid or accrued payments
for Christopher M. Starr, the Company’s Co-Founder, Executive
Chairman of Monopar’s Board of Directors as a C Corporation,
common stockholder and former Manager of the predecessor LLC
$30,000 and $25,224 for the three months ended June 30, 2019 and
2018; and $60,000 and $50,449 for the six months ended June 30,
2019 and 2018, respectively. Michael Brown, as a managing member of
Tactic Pharma (with no voting power as it relates to the Company
commencing February 1, 2019), a previous managing member of Monopar
as an LLC and common stockholder and board member of Monopar as a C
Corporation was paid or accrued for $15,500 and $10,000 in board
fees for the three months ended June 30, 2019 and 2018; and $31,000
and $20,000 for the six months ended June 30, 2019 and 2018,
respectively.
F-16
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
During
the three and six months ended June 30, 2018, the Company paid or
accrued legal fees to a large national law firm, in which a family
member of the Company’s Chief Executive Officer was a law
partner through January 31, 2019, approximately $39,584 and
$92,584, respectively. The family member personally billed a
de minimis amount of time
on the Company’s legal engagement with the law firm in these
periods.
Note
7 – Commitments and Contingencies
Development
and Collaboration Agreements
Onxeo S.A.
The
Onxeo license agreement for Validive includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. During the three and six
months ended June 30, 2019, the Company had not reached any of
these milestones and has not been required to pay Onxeo any funds
under this license agreement other than the one-time license
fee.
Grupo Español de Investigación en Sarcomas
(“GEIS”)
In June
2019, the Company executed a clinical collaboration with GEIS for
the development of camsirubicin in patients with advanced soft
tissue sarcoma (“ASTS”). GEIS will be the study sponsor
and will lead a multi-country, randomized, open-label Phase 2
clinical trial to evaluate camsirubicin head-to-head against
doxorubicin in patients with ASTS. Enrollment of the trial is
currently expected to begin in the first quarter of
2020, and to include approximately 170 ASTS patients. The Company
will provide study drug and supplemental financial support for the
clinical trial averaging approximately $1 million to $2 million per
year. The Company can terminate the agreement by providing GEIS
with advance notice, and without affecting the Company’s
rights and ownership to any intellectual property or clinical
data.
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 but is not required to pay royalties on
product sales. During the three and six months ended June 30, 2019,
the Company had not reached any milestones and has not been
required to pay XOMA Ltd. any funds under this license
agreement.
Operating
Leases
Commencing January
1, 2018, the Company entered into a lease for its executive
headquarters at 1000 Skokie Blvd., Suite 350, Wilmette, Illinois.
The lease term is January 1, 2018 through December 31, 2019. In
addition, effective February 2019, the Company leases on a
month-to-month basis additional office space in the same
building.
During
the three and six months ended June 30, 2019, the Company
recognized operating lease expense of $13,462 and $24,965,
respectively. During the three and six months ended June 30, 2018,
the Company recognized operating lease expense of $9,344 and
$22,585, respectively.
As a
result of the adoption of ASU 2016-02, as amended by ASU 2018-10,
as of June 30, 2019, the Company’s condensed consolidated
balance sheet includes (a) a lease liability of $15,117 in other
current liabilities, and (b) a right-of-use asset of $15,117 in
other current assets. Due to the adoption of the standard using the
retrospective cumulative-effect adjustment method, there are no
changes to our previously reported results prior to January 1,
2019. The effect on the operating lease expense was nominal as a
result of the adoption of ASU 2016-02, as amended by ASU
2018-10.
F-17
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
The
future lease commitments as presented below represent amounts for
the Company’s lease of its executive
headquarters.
2019 (July 1 to December 31)
|
|
$15,117
|
Thereafter
|
|
—
|
Total
future lease payments
|
|
$15,117
|
Legal
Contingencies
The
Company is subject to claims and assessments from time to time in
the ordinary course of business. No claims have been asserted to
date.
Indemnification
In the
normal course of business, the Company enters into contracts and
agreements that contain a variety of representations and warranties
and provide for general indemnification. The Company’s
exposure under these agreements is unknown because it involves
claims that may be made against the Company in the future, but that
have not yet been made. To date, the Company has not paid any
claims nor been required to defend any action related to its
indemnification obligations. However, the Company may record
charges in the future as a result of future claims against these
indemnification obligations.
In
accordance with its amended and restated certificate of
incorporation and bylaws, the Company has indemnification
obligations to its officers and directors for certain events or
occurrences, subject to certain limits, while they are serving at
the Company’s request in such capacities. There have been no
claims to date.
F-18
Monopar Therapeutics Inc.
Financial Statements
December 31, 2018 and 2017
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
Report of
Independent Registered Public Accounting Firm
|
F-20
|
Consolidated Balance Sheets as of December 31, 2018 and
2017
|
F-21
|
Consolidated Statements of Operations and Comprehensive Loss
for the Years Ended December 31, 2018 and 2017
|
F-22
|
Consolidated Statements of Stockholders’ Equity for the
Years Ended December 31, 2018 and 2017
|
F-23
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2018 and 2017
|
F-24
|
Notes to
Consolidated Financial Statements
|
F-25 to
F-40
|
F-19
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders and Board of Directors of
Monopar
Therapeutics Inc.
Opinion on the Consolidated Financial Statements
We have
audited the accompanying consolidated balance sheets of Monopar
Therapeutics Inc. and its subsidiaries (the "Company") as of
December 31, 2018 and 2017, the related consolidated statements of
operations and comprehensive loss, stockholders’ equity and
cash flows, for each of the two years in the period ended December
31, 2018, and the related notes and the financial statement
schedule listed in the Index to the Annual Report on Form 10-K at
Part IV Item 15-2 (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2018 and 2017, and the
results of its operations and its cash flows for each of the two
years in the period ended December 31, 2018, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on the Company's consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) ("PCAOB") and
are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ BPM
LLP
We have
served as the Company's auditor since 2015.
San
Francisco, California
February
26, 2019
F-20
Monopar Therapeutics Inc.
Consolidated Balance Sheets
|
|
|
|
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$6,892,772
|
$8,981,894
|
Prepaid
expenses and other current assets
|
425,183
|
149,342
|
Total
current assets
|
7,317,955
|
9,131,236
|
|
|
|
Restricted
cash
|
—
|
800,031
|
|
|
|
Total
assets
|
$7,317,955
|
$9,931,267
|
Liabilities and Stockholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable, accrued expenses
and
other current liabilities
|
$399,551
|
$311,867
|
Total
current liabilities
|
399,551
|
311,867
|
Long
term liabilities
|
—
|
—
|
|
|
|
Total
liabilities
|
399,551
|
311,867
|
|
|
|
Commitments
and contingencies (Note 9)
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
Common
stock, par value of $0.001 per
share,
40,000,000 authorized, 9,291,421
shares
issued and outstanding at
December
31, 2018 and 2017
|
9,291
|
9,291
|
Additional
paid-in capital
|
28,567,221
|
28,037,889
|
Accumulated
deficit
|
(21,655,712)
|
(18,427,780)
|
Accumulated
other comprehensive loss
|
(2,396)
|
—
|
Total
stockholders’ equity
|
6,918,404
|
9,619,400
|
Total
liabilities and stockholders’ equity
|
$7,317,955
|
$9,931,267
|
The
accompanying notes are an integral
part of
these consolidated financial statements.
F-21
Monopar Therapeutics Inc.
Consolidated Statements of Operations and Comprehensive
Loss
|
|
|
|
|
Revenues
|
$—
|
$—
|
|
—
|
—
|
Operating
expenses:
|
|
|
Research
and development
|
1,774,454
|
935,319
|
In-process
research and development
|
—
|
14,501,622
|
General
and administrative
|
1,628,308
|
1,166,186
|
Total
operating expenses
|
3,402,762
|
16,603,127
|
Loss
from operations
|
(3,402,762)
|
(16,603,127)
|
Other
income:
|
|
|
Interest
and other income
|
103,215
|
48,255
|
Loss
before income tax benefit
|
(3,299,547)
|
(16,554,872)
|
|
|
|
Income
tax benefit
|
71,615
|
—
|
Net
loss
|
(3,227,932)
|
(16,554,872)
|
Other
comprehensive income (loss):
|
|
|
Foreign
currency translation loss
|
(2,396)
|
—
|
Comprehensive
loss
|
$(3,230,328)
|
$(16,554,872)
|
Net
loss per share:
|
|
|
Basic
and diluted
|
$(0.35)
|
$(1.89)
|
Weighted-average
shares outstanding:
|
|
|
Basic
and diluted
|
9,291,421
|
8,782,037
|
The
accompanying notes are an integral
part of
these consolidated financial statements.
F-22
Monopar Therapeutics Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
Series A and Z Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2017
|
115,894
|
$116
|
—
|
$—
|
$4,703,848
|
$(1,872,908)
|
$—
|
$2,831,056
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred stock to common stock
|
(115,894)
|
(116)
|
8,335,080
|
8,335
|
(8,219)
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock at $6 per share for cash,
net
of $32,400 issuance costs
|
—
|
—
|
789,674
|
790
|
4,704,856
|
—
|
—
|
4,705,646
|
Tactic
Pharma shares surrendered
|
—
|
—
|
(2,888,727)
|
(2,889)
|
2,889
|
—
|
—
|
—
|
Shares
issued in Gem transaction, net of issuance
costs
of $169,257
|
—
|
—
|
3,055,394
|
3,055
|
18,329,310
|
—
|
—
|
18,332,365
|
Non-cash
stock compensation
|
—
|
—
|
—
|
—
|
305,205
|
—
|
—
|
305,205
|
|
|
|
|
|
|
|
|
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(16,554,872)
|
—
|
(16,554,872)
|
Balance
at January 1, 2018
|
—
|
—
|
9,291,421
|
9,291
|
28,037,889
|
(18,427,780)
|
—
|
9,619,400
|
|
|
|
|
|
|
|
|
|
Non-cash
stock compensation
|
—
|
—
|
—
|
—
|
529,332
|
—
|
—
|
529,332
|
|
|
|
|
|
|
|
|
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(3,227,932)
|
—
|
(3,227,932)
|
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,396)
|
(2,396)
|
Balance
at December 31, 2018
|
—
|
$—
|
9,291,421
|
$9,291
|
$28,567,221
|
$(21,655,712)
|
$(2.396)
|
$6,918,404
|
The
accompanying notes are an integral
part of
these consolidated financial statements.
F-23
Monopar Therapeutics Inc.
Consolidated Statements of Cash Flows
|
|
December 31,
|
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
|
$(3,227,932)
|
|
$(16,554,872)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Stock-based
compensation (non-cash)
|
|
529,332
|
|
305,205
|
In
process research and development (non-cash)
|
|
—
|
|
13,501,622
|
Changes in operating assets and liabilities, net
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
(275,841)
|
|
(126,780)
|
Accounts
payable, accrued expenses and other current
liabilities
|
|
87,684
|
|
247,357
|
Net
cash used in operating activities
|
|
(2,886,757)
|
|
(2,627,468)
|
Cash flows from financing activities:
|
|
|
|
|
Cash
received from Gem, net of $169,257 of transaction
costs
|
|
—
|
|
4,830,743
|
Proceeds
from the sale of common stock, net of $32,400 of issuance
costs
|
|
—
|
|
4,705,646
|
Net
cash provided by financing activities
|
|
—
|
|
9,536,389
|
Effect
of exchange rates on cash, cash equivalents, and restricted
cash
|
|
(2,396)
|
|
—
|
Net
increase (decrease) in cash, cash equivalents and restricted
cash
|
|
(2,889,153)
|
|
6,908,921
|
Cash, cash equivalents and restricted cash at beginning of
period
|
|
9,781,925
|
|
2,873,004
|
Cash, cash equivalents and restricted cash at end of
period
|
|
$ 6,892,772
|
|
$ 9,781,925
|
Supplemental disclosure of non-cash items for cash flow
information:
|
|
|
|
|
Value of shares issued in Gem
transaction
|
|
—
|
|
18,332,365
|
The
accompanying notes are an integral
part of
these consolidated financial statements.
F-24
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Note
1 - Nature of Business and Liquidity
Nature of Business
Monopar
Therapeutics Inc. (“Monopar” or the
“Company”) is an emerging biopharmaceutical company
focused on developing innovative drugs and drug combinations to
improve clinical outcomes in cancer patients. Monopar currently has
three compounds in development: Validive® (clonidine
mucobuccal tablet; clonidine MBT), a Phase 3-ready, first-in-class
mucoadhesive buccal anti-inflammatory tablet for the prevention and
treatment of chemoradiation-induced severe oral mucositis
(“SOM”) in oropharyngeal cancer patients; camsirubicin (generic name
for GPX-150; 5-imino-13-deoxydoxorubicin), a proprietary Phase 2
clinical-stage topoisomerase II-alpha targeted analog of doxorubicin engineered
specifically to retain anticancer activity while minimizing toxic
effects on the heart; and MNPR-101 (formerly huATN-658), a pre-IND
stage humanized monoclonal antibody, which targets the urokinase
plasminogen activator receptor (“uPAR”), for the
treatment of advanced solid cancers.
The
Company was originally formed in the State of Delaware on December
5, 2014 as a limited liability company (“LLC”) and on
December 16, 2015 converted to a C Corporation in a tax-free
exchange at which time the Company effected a 1 for 10 reverse
stock split. All references to preferred stock and common stock
authorized take into account the 1 for 10 reverse stock split. In
March 2017, the Company’s Series A Preferred Stock and Series
Z Preferred Stock converted into common stock at a conversion rate
of 1.2 for 1 and 1 for 1, respectively, which eliminated all shares
of Series A Preferred Stock and Series Z Preferred Stock along with
a concurrent common stock split of 70 for 1. All references to
common stock authorized, issued and outstanding and common stock
options take into account the 70 for 1 stock split.
Liquidity
The
Company has incurred an accumulated loss of approximately $21.7
million as of December 31, 2018. To date, the Company has primarily
funded its operations with the net proceeds from private placements
of convertible preferred stock and of common stock and from the
cash provided in the camsirubicin asset
purchase transaction. Management believes that currently available
resources will provide sufficient funds to enable the Company to
meet its minimum obligations through March 2020. The
Company’s ability to fund its future operations, including
the clinical development of Validive, is dependent primarily upon
its ability to execute on its business strategy and obtain
additional funding and/or execute collaboration research
transactions. There can be no certainty that future financing or
collaborative research transactions will occur.
Note 2 - Significant Accounting Policies
Basis of Presentation
These
consolidated financial statements include the books of Monopar
Therapeutics Inc., its French branch, its wholly-owned French
subsidiary, Monopar Therapeutics, SARL and its wholly-owned
Australian subsidiary, Monopar Therapeutics Pty Ltd and have been
prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) and include all
disclosures required by GAAP for financial reporting. The principal
accounting policies applied in the preparation of these financial
statements are set out below and have been consistently applied in
all periods presented. The Company has been primarily involved in
performing research activities, developing product candidates, and
raising capital to support and expand these
activities.
Certain
reclassifications have been made to the Company’s
consolidated financial statements for the year ended December 31,
2018 to conform to the year ended December 31, 2017 presentation.
The reclassifications had no impact on the Company’s net
loss, total assets, or stockholders’ equity.
Functional Currency
The
Company's consolidated functional currency is the U.S. Dollar. The
Company's Australian subsidiary and French subsidiary use the
Australian Dollar and European Euro, respectively, as their
functional currency. At each quarter end, each foreign subsidiary's
balance sheets are translated into U.S. Dollars based upon the
quarter-end exchange rate, while their statements of operations and
comprehensive loss are translated into U.S. Dollars based upon an
average exchange rate during the period.
F-25
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Comprehensive Loss
Comprehensive loss
represents net loss plus any gains or losses not reported in the
statements of operations, such as foreign currency translations
gains and losses that are typically reflected on a company’s
statements of stockholders’ equity.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and reported amounts of revenues
and expenses in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
Going Concern Assessment
The
Company adopted Accounting Standards Updates (“ASU”)
2014-15, Disclosure of
Uncertainties about an Entity’s Ability to Continue as a
Going Concern, which the Financial Accounting Standards
Board (“FASB”) issued to provide guidance on
determining when and how reporting companies must disclose
going-concern uncertainties in their financial statements. The ASU
requires management to perform interim and annual assessments of an
entity’s ability to continue as a going concern within one
year of the date of issuance of the entity’s financial
statements (or within one year after the date on which the
financial statements are available to be issued, when applicable).
Further, a company must provide certain disclosures if there is
“substantial doubt about the entity’s ability to
continue as a going concern.” In February 2019, the Company
analyzed its minimum cash requirements through March 2020 and has
determined that, based upon the Company’s current available
cash, the Company has no substantial doubt about its ability to
continue as a going concern.
Cash Equivalents
The
Company considers all highly liquid investments purchased with an
original maturity of 90 days or less to be cash equivalents. Cash
equivalents as of December 31, 2018 and 2017 consist entirely of
money market accounts.
Restricted Cash
On July
9, 2015, the Company entered into a Clinical Trial and Option
Agreement (“CTOA”) with Cancer Research UK. Pursuant to
the CTOA, the Company deposited $0.8 million into an escrow account
to cover certain future indemnities, claims or potential
termination costs incurred by Cancer Research UK. Restricted cash
was $0 as of December 31, 2018 and $0.8 million as of December 31,
2017. In connection with a portfolio reprioritization review, on
March 21, 2018, Cancer Research UK notified us that it was
terminating the CTOA and transferred to us the data generated under
the CTOA. These funds were released from escrow in September 2018
and were deposited into a money market account and reclassified as
cash equivalents.
Prepaid Expenses
Prepayments are
expenditures for goods or services before the goods are used or the
services are received and are charged to operations as the benefits
are realized. Prepaid expenses include insurance premiums and
software costs that are expensed monthly over the life of the
contract.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration
of credit risk consist of cash and cash equivalents. The Company
maintains cash and cash equivalents at one financial institution.
As of December 31, 2018, cash and cash equivalents were in excess
of the $250,000 Federal Deposit Insurance Corporation
(“FDIC”) insurable limit.
F-26
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Fair Value of Financial Instruments
For
financial instruments consisting of cash and cash equivalents,
prepaid expenses, deferred offering costs, accounts payable and
accrued expenses, the carrying amounts are reasonable estimates of
fair value due to their relatively short maturities.
The Company adopted Accounting Standard
Codification (“ASC”) 820, Fair Value Measurements and
Disclosures, as amended,
addressing the measurement of the fair value of financial assets
and financial liabilities. Under this standard, fair value is
defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., the “exit price”) in an orderly
transaction between market participants at the measurement
date.
In
determining fair values of all reported assets and liabilities that
represent financial instruments, the Company uses the carrying
market values of such amounts. The
standard establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs reflect
assumptions market participants would use in pricing an asset or
liability based on market data obtained from independent sources.
Unobservable inputs reflect a
reporting entity’s pricing an asset or liability developed based on the best information available
in the circumstances. The fair value hierarchy consists of
the following three levels:
Level 1 - instrument valuations are
obtained from real-time quotes for transactions in active exchange
markets involving identical assets.
Level 2 - instrument valuations are
obtained from readily-available pricing sources for comparable
instruments.
Level 3 - instrument valuations are
obtained without observable market values and require a high-level
of judgment to determine the fair value.
Determining which
category an asset or liability falls within the hierarchy requires
significant judgment. The Company evaluates its hierarchy
disclosures each reporting period. There were no transfers between
Level 1, 2 or 3 of the fair value hierarchy during the years ended
December 31, 2018 and 2017. The following table presents the assets
and liabilities recorded that are reported at fair value on our
consolidated balance sheets on a recurring basis.
Assets and Liabilities Measured at Fair Value on a Recurring
Basis
December
31, 2018
|
|
|
|
Assets
|
|
|
|
Cash
equivalents(1)
|
$6,788,333
|
$—
|
$6,788,333
|
Total
|
$6,788,333
|
$—
|
$6,788,333
|
(1)
Cash equivalents
represent the fair value of the Company’s investments in a
money market account at December 31, 2018.
December
31, 2017
|
|
|
|
Assets
|
|
|
|
Cash
equivalents(1)
|
$8,872,982
|
$—
|
$8,872,982
|
Restricted
cash(2)
|
31
|
800,000
|
800,031
|
Total
|
$8,873,013
|
$800,000
|
$9,673,013
|
(1)
Cash equivalents represent the fair value of the Company’s
investments in two money market accounts at December 31,
2017.
(2)
Restricted cash
represents the fair value of the Company’s investments in an
$800,000 certificate of deposit and $31 in a money market account
at December 31, 2017.
F-27
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Net Loss per Share
Net
loss per share for the year ended December 31, 2018 is calculated
by dividing net loss by the weighted-average shares of common stock
outstanding during the period. Diluted net loss per share for the
year ended December 31, 2018 is calculated by dividing net loss by
the weighted-average shares of common stock outstanding and
potential shares of common stock during the period. As of December
31, 2018, potentially dilutive securities included 1,105,896
options to purchase common stock. As of December 31, 2017,
potentially dilutive securities included stock options to purchase
up to 658,592 shares of the Company’s common
stock. For all periods
presented, potentially dilutive securities are excluded from the
computation of fully diluted net loss per share as their effect is
anti-dilutive.
Research and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of research and development expenses include
salaries and benefits paid to the Company’s R&D staff,
fees paid to consultants and to the entities that conduct certain
development activities on the Company’s behalf and materials
and supplies.
The
Company accrues and expenses the costs for clinical trial
activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study
in accordance with agreements established with contract research
organizations and clinical trial sites. The Company determines the
estimates through discussions with internal clinical personnel and
external service providers as to progress or stage of completion of
trials or services and the agreed upon fee to be paid for such
services. Costs of setting up clinical trial sites for
participation in the trials are expensed immediately as research
and development expenses. Clinical trial site costs related to
patient enrollment are accrued as patients are entered into the
trial. During the years ended December 31, 2018 and 2017, the
Company had no clinical trials in progress.
In-process Research and Development
In-process research
and development (“IPR&D”) expense represents the
costs to acquire technologies to be used in research and
development that have not reached technological feasibility, have
no alternative future uses and thus are expensed as incurred.
IPR&D expense also includes upfront license fees and milestones
paid to collaborators for technologies with no alternative
use.
Collaborative Arrangements
The
Company and its future collaborative partner would be active
participants in a collaborative arrangement and all parties would
be exposed to significant risks and rewards depending on the
technical and commercial success of the activities. Contractual
payments to the other party in collaboration agreements and costs
incurred by the Company when the Company is deemed to be the
principal participant for a given transaction are recognized on a
gross basis in R&D expenses. Royalties and license payments are
recorded as earned.
During
the years ended December 31, 2018 and 2017, no milestones were met
and no royalties were earned, therefore, the Company did not pay or
accrue/expense any milestone or royalty payments.
Licensing Agreements
The
Company has various agreements to license technology utilized in
the development of its programs. The licenses contain success
milestone obligations and royalties on future sales. During the
years ended December 31, 2018 and 2017, no milestones were met and
no royalties were earned, therefore, the Company did not pay or
accrue/expense any milestone or royalty payments under any of its
license agreements.
Patent Costs
The
Company expenses costs relating to issued patents and patent
applications, including costs relating to legal, renewal and
application fees, as a component of general and administrative
expenses in its consolidated statements of operations and
comprehensive loss.
F-28
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Income Taxes
From
December 2014 to December 16, 2015, the Company was an LLC taxed as
a partnership under the Internal Revenue Code, during which period
the members separately accounted for their pro-rata share of
income, deductions, losses, and credits of the Company. On December
16, 2015, the Company converted from an LLC to a C Corporation.
Beginning on December 16, 2015, the Company uses an asset and
liability approach for accounting for deferred income taxes, which
requires recognition of deferred income tax assets and liabilities
for the expected future tax consequences of events that have been
recognized in its financial statements, but have not been reflected
in its taxable income. Estimates and judgments occur in the
calculation of certain tax liabilities and in the determination of
the recoverability of certain deferred income tax assets, which
arise from temporary differences and carryforwards. Deferred income
tax assets and liabilities are measured using the currently enacted
tax rates that apply to taxable income in effect for the years in
which those tax assets and liabilities are expected to be realized
or settled.
The
Company regularly assesses the likelihood that its deferred income
tax assets will be realized from recoverable income taxes or
recovered from future taxable income. To the extent that the
Company believes any amounts are more likely not to be realized,
the Company records a valuation allowance to reduce the deferred
income tax assets. In the event the Company determines that all or
part of the net deferred tax assets are not realizable in the
future, an adjustment to the valuation allowance would be charged
to earnings in the period such determination is made. Similarly, if
the Company subsequently realizes deferred income tax assets that
were previously determined to be unrealizable, the respective
valuation allowance would be reversed, resulting in an adjustment
to earnings in the period such determination is made.
Internal Revenue
Code Section 382 provides that, after an ownership change, the
amount of a loss corporation’s net operating loss
(“NOL”) for any post-change year that may be offset by
pre-change losses shall not exceed the section 382 limitation for
that year. Because the Company will continue to raise equity in the
coming years, section 382 may limit the Company’s usage of
NOLs in the future.
Based
on the available evidence, the Company believed it was not likely
to utilize its minimal deferred tax assets in the future and as a
result, the Company recorded a full valuation allowance as of
December 31, 2018 and 2017. The Company intends to maintain the
valuation allowance until sufficient evidence exists to support
their reversal. The Company regularly reviews its tax positions and
for a tax benefit to be recognized, the related tax position must
be more likely than not to be sustained upon examination. Any
amount recognized is generally the largest benefit that is more
likely than not to be realized upon settlement. The Company’s
policy is to recognize interest and penalties related to income tax
matters as an income tax expense. For the years ended December 31,
2018 and 2017, the Company did not have any interest or penalties
associated with unrecognized tax benefits.
The
Company is subject to U.S. Federal, Illinois and California income
taxes. Tax regulations within each jurisdiction are subject to the
interpretation of the related tax laws and regulations and require
significant judgment to apply. The Company was incorporated on
December 16, 2015 and is subject to U.S. Federal, state and local
tax examinations by tax authorities for the years ended December
31, 2018, 2017 and 2016 and for the short tax period December 16,
2015 to December 31, 2015. The Company does not anticipate
significant changes to its current uncertain tax positions through
December 31, 2018. The Company plans on filing its tax returns for
the year ending December 31, 2018 prior to the filing deadlines in
all jurisdictions.
On
December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted.
The Tax Reform Bill was effective as of January 1, 2018. In
accordance with ASC guidance, deferred tax assets/liabilities in
the Company’s financial statements for the years ended
December 31, 2018 and 2017, were reflected at the tax rate in which
the deferred tax assets/liabilities are anticipated to be realized.
As a result, the Company changed the tax rate for tax provision
purposes commencing on December 31, 2017 from 34% to
21%.
F-29
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements with
employees, non-employee directors and consultants using a fair
value method, which requires the recognition of compensation
expense for costs related to all stock-based payments, including
stock options. The fair value method requires the Company to
estimate the fair value of stock-based payment awards on the date
of grant using an option pricing model.
Stock-based
compensation costs for options granted to employees and
non-employee directors are based on the fair value of the
underlying option calculated using the Black-Scholes option-pricing
model on the date of grant for stock options and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
estimating stock price volatility, forfeiture rates and expected
term. The expected volatility rates are estimated based on the
historical volatility of comparable public companies over a
historical term equal to the expected term in duration. The Company
selected these companies based on comparable characteristics,
including market capitalization, stage of development and with
historical share price information sufficient to meet the expected
life of the stock-based awards. The expected term for options
granted to date is estimated using the simplified method.
Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates. The Company has not paid dividends and does not
anticipate paying a cash dividend in the future vesting period and,
accordingly, uses an expected dividend yield of zero. The risk-free
interest rate is based on the rate of U.S. Treasury securities with
maturities consistent with the estimated expected term of the
awards. The measurement of consultant share-based compensation is
subject to periodic adjustments as the underlying equity
instruments vest and is recognized as an expense over the period
over which services are rendered.
Recent Accounting Pronouncements
In
January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial
Assets and Financial Liabilities. The purpose is to enhance
the reporting model for financial instruments to provide users of
financial statements with more decision-useful information. The
Company has adopted this ASU and determined that it does not have a
material effect on its financial condition and consolidated results
of operations and comprehensive loss for the year ended December
31, 2018.
In
February 2016, the FASB issued ASU 2016-02, Leases, which has been amended by ASU
No. 2018-10, Codification
Improvements to Topic 842, Leases, which for operating
leases, requires a lessee to recognize a right-of-use asset and a
lease liability, initially measured at the present value of the
lease payments, in its balance sheet. The standard also requires a
lessee to recognize a single lease cost, calculated so that the
cost of the lease is allocated over the lease term, generally on a
straight-line basis. This ASU was further amended by ASU No.
2018-11, Leases (Topic 842):
Targeted Improvements, issued in July 2018. The ASU 2018-11
is intended to reduce costs and ease implementation of the
Leases standard for
financial statement preparers. ASU 2018-11 provides a new
transition method and a practical expedient for separating
components of a contract. ASU 2016-02 will be effective for the
Company in the first quarter of 2019, and early adoption is
permitted. The Company is currently assessing the impact that
adopting this new accounting standard will have on its consolidated
financial statements and footnote disclosures.
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying
the Definition of a Business (“ASU No.
2017-01”). The amendments in ASU No. 2017-01 clarify the
definition of a business with the objective of adding guidance to
assist entities with evaluating whether transactions should be
accounted for as acquisitions (or disposals) of assets or
businesses. The definition of a business affects many areas of
accounting including acquisitions, disposals, goodwill and
consolidation. For public companies, the amendments are effective
for annual periods beginning after December 15, 2017, including
interim periods within those periods. For all other companies and
organizations, the amendments are effective for annual periods
beginning after December 15, 2018, and interim periods within
annual periods beginning after December 15, 2019. The Company has
adopted this ASU and determined it does not have a material impact
on its financial condition and consolidated statements of
operations and comprehensive loss for the year ended December 31,
2018.
F-30
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
In May
2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718):
Scope of Modification Accounting. The amendment amends the
scope of modification accounting for share-based payment
arrangements, provides guidance on the types of changes to the
terms or conditions of share-based payment awards to which an
entity would be required to apply modification accounting under ASC
718. This ASU is effective for all entities for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2017. The Company has adopted this ASU and determined
that it does not have a material effect on its financial condition
and consolidated results of operations and comprehensive loss for
the year ended December 31, 2018.
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, (Part II) Replacement of the Indefinite
Deferral for Mandatorily Redeemable Financial Instruments of
Certain Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests with a Scope Exception. This ASU
simplifies the accounting for certain financial instruments with
down round features, a provision in an equity-linked financial
instrument (or embedded feature) that provides a downward
adjustment of the current exercise price based on the price of
future equity offerings. Down round features are common in
warrants, convertible preferred shares, and convertible debt
instruments issued by private companies and development-stage
public companies. This new ASU requires 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 provisions of this new ASU related to down
rounds are effective for public business entities for fiscal years,
and interim periods within those fiscal years, beginning after
December 15, 2018. For all other entities, the amendments are
effective for fiscal years beginning after December 15, 2019, and
interim periods within fiscal years beginning after December 15,
2020. Early adoption is permitted for all entities. The Company is
currently assessing the impact that adopting this new accounting
standard will have on its consolidated financial statements and
footnote disclosures.
In
February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to
Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities, that clarifies the guidance in ASU No. 2016-01,
Financial Instruments –
Overall (Subtopic 825-10). For public business entities, ASU
2018-03 is effective for fiscal years beginning after June 15,
2018. Public business entities with fiscal years beginning between
December 15, 2017, and June 15, 2018, are not required to adopt ASU
2018-03 until the interim period beginning after June 15, 2018. The
Company has early adopted this ASU and determined that it does not
have a material effect on its financial condition and consolidated
results of operations and comprehensive loss for the year ended
December 31, 2018.
In
March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No.
118. This ASU amends certain SEC material on Topic 740 for
the income tax accounting implications of the recently issued Tax
Cuts and JOBS Act. ASU 2018-05 is effective upon inclusion in the
FASB Codification. The Company has adopted this ASU and determined
it does not have a material impact on its financial condition and
consolidated results of operations and comprehensive loss for the
year ended December 31, 2018.
In June
2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting.
The ASU is intended to reduce the cost and complexity and to
improve financial reporting for nonemployee share-based payments.
The ASU expands the scope of Topic 718, Compensation—Stock Compensation
(which currently only includes share-based payments to employees)
to include share-based payments issued to nonemployees for goods or
services. Consequently, the accounting for share-based payments to
nonemployees and employees will be substantially aligned. The ASU
supersedes Subtopic 505-50, Equity—Equity-Based Payments to
Non-Employees. The amendments in this ASU are effective for
public companies for fiscal years beginning after December 15,
2018, including interim periods within that fiscal year. For all
other companies, the amendments are effective for fiscal years
beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020. Early adoption is
permitted, but no earlier than a company’s adoption date of
Topic 606, Revenue from Contracts
with Customers. The Company is currently assessing the
impact that adopting this new accounting standard will have on its
consolidated financial statements and footnote
disclosures.
F-31
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement. The ASU modifies, and in certain cases
eliminates, the disclosure requirements on fair value measurements
in Topic 820. The
amendments in ASU No. 2018-13 are effective for all entities for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. Early adoption is permitted. An
entity is permitted to early adopt any removed or modified
disclosures upon issuance of ASU No. 2018-13 and delay adoption of
the additional disclosures until their effective date. The Company
is currently assessing the impact that adopting this new accounting
standard will have on its consolidated financial statements and
footnote disclosures.
Note 3 - Capital Stock
On
December 16, 2015, the Company converted from an LLC to a C
Corporation at which time the Company effected a 1 for 10 reverse
stock split. All references to preferred stock authorized, issued
and outstanding and common stock authorized take into account the 1
for 10 reverse stock split. In March 2017, the Company’s
Series A Preferred Stock and Series Z Preferred Stock converted to
common stock at a conversion rate of 1.2 for 1 and 1 for 1,
respectively, along with a simultaneous common stock split of 70
for 1 and the elimination all shares of Series A Preferred Stock
and Series Z Preferred Stock (collectively, the
“Conversion”). 100,000 shares of Series Z Preferred
Stock were converted into 7,000,000 shares of common stock and
15,894 shares of Series A Preferred Stock were converted into
1,335,079 shares of common stock. All references to common stock
authorized, issued and outstanding and common stock options take
into account the 70 for 1 stock split.
Holders
of the common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally
available therefor. Upon dissolution and liquidation of the
Company, holders of the common stock are entitled to a ratable
share of the net assets of the Company remaining after payments to
creditors of the Company. The holders of shares of common stock are
entitled to one vote per share for the election of directors and on
all other matters submitted to a vote of stockholders.
The
Company’s amended and restated certificate of incorporation
authorizes the Company to issue 40,000,000 shares of common stock
with a par value of $0.001 per share.
As of
December 31, 2018, the Company had 9,291,421 shares of common stock
issued and outstanding. The Company no longer has any shares of
preferred stock authorized or outstanding.
In
April 2016, the Company adopted the 2016 Stock Incentive Plan and
the Company’s Board of Directors reserved 700,000 shares of
common stock for issuances under the plan (as adjusted subsequent
to the Conversion). In October 2017, the Company’s Board of
Directors increased the stock option pool to 1,600,000 shares of
common stock.
Contribution to Capital
In
August 2017, the Company’s largest stockholder, Tactic
Pharma, LLC (“Tactic Pharma”), surrendered 2,888,727
shares of common stock back to the Company as a contribution to the
capital of the Company. This resulted at that time in reducing
Tactic Pharma’s ownership in Monopar from 79.5% to
69.9%.
Sales of Common Stock
Pursuant to an
active private placement memorandum, during the period from July 1,
2017 through September 30, 2017, Monopar sold 448,834 shares of
common stock at $6 per share for proceeds of approximately $2.7
million. This financing closed on September 30, 2017.
Issuance of Common Stock in the Gem Transaction
Pursuant to the Gem
Transaction, discussed in detail in Note 6 below, the Company
issued 3,055,394 shares of its common stock in exchange for cash
and intellectual property related to GPX-150 (renamed camsirubicin).
F-32
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Note 4 - Stock Option Plan
In
April 2016, the Company’s Board of Directors and the
convertible preferred stockholders representing a majority of the
Company’s outstanding stock approved, the Monopar
Therapeutics Inc. 2016 Stock Incentive Plan (the
“Plan”) allowing the Company to grant up to an
aggregate 700,000 shares of stock awards, stock options, stock
appreciation rights and other stock-based awards to employees,
directors and consultants. Concurrently, the Board of Directors
granted to certain Board members and the Company’s acting
chief financial officer stock options to purchase up to an
aggregate 273,000 shares of the Company’s common stock at an
exercise price of $0.001 par value based upon a third-party
valuation of the Company’s common stock. In December 2016,
the Board of Directors granted stock options to purchase up to
7,000 shares of the Company’s common stock at an exercise
price of $0.001 par value to the Company’s acting chief
medical officer.
In
February 2017, the Board of Directors granted to certain Board
members and the Company’s acting chief financial officer
stock options to purchase up to an aggregate 275,520 shares of the
Company’s common stock at an exercise price of $0.001 par
value based upon a third-party valuation of the Company’s
common stock. In September 2017, the Board of Directors represented
by the designated Plan Administrator, granted options to purchase
up to 21,024 shares of common stock to each of the three new Board
members and in November 2017, the Company granted options to
purchase up to 40,000 shares of common stock to an employee. These
Board and employee options have an exercise price of $6 per share
based on the price per share at which common stock was sold in the
Company’s most recent private offering.
In
January 2018, the Company granted options to purchase up to 32,004
shares of common stock to its acting chief medical officer, at an
exercise price of $6 per share based on the price per share at
which common stock was sold in the Company’s most recent
private offering. In May 2018 and August 2018, the Company granted
options to two employees to each purchase up to 5,000 shares of
common stock, at an exercise price of $6 per share based on the
price per share at which common stock was sold in the
Company’s most recent private offering. Also in August 2018,
the Company granted stock options to all of its non-employee Board
members, the Company’s chief executive officer, chief
scientific officer, and chief financial officer to purchase up to
an aggregate 425,300 shares of the Company’s common stock at
an exercise price of $6 per share based on the price per share at
which common stock was sold in the Company’s most recent
private offering. Vesting of such options commenced on October 1,
2018. In December 2018, the Company granted options to purchase up
to 20,000 shares of common stock to its acting chief medical
officer, at an exercise price of $6 per share based on the price
per share at which common stock was sold in the Company’s
most recent private offering. Vesting of such options commenced on
January 1, 2019.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option shall be determined by the Plan
Administrator, except that the per share exercise price shall be no
less than 100% of the fair market value per share on the grant
date. Fair market value is established by the Company’s Board
of Directors, using third-party valuation reports and recent
financings. Options generally expire after ten years.
F-33
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Stock
option activity under the Plan was as follows:
|
|
|
|
Options Outstanding
|
|
|
Options Available
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
Balances at January 1, 2017
|
|
420,000
|
|
280,000
|
|
$0.001
|
Board-approved increase in option pool(1)
|
|
900,000
|
|
—
|
|
—
|
Granted (2)
|
|
(378,592)
|
|
378,592
|
|
1.63
|
Forfeited
|
|
—
|
|
—
|
|
—
|
Exercised
|
|
—
|
|
—
|
|
—
|
Balances at December 31, 2017
|
|
941,408
|
|
658,592
|
|
0.94
|
Granted(3)
|
|
(487,304)
|
|
487,304
|
|
6.00
|
Forfeited(4)
|
|
40,000
|
|
(40,000)
|
|
6.00
|
Exercised
|
|
—
|
|
—
|
|
—
|
Balances at December 31, 2018
|
|
494,104
|
|
1,105,896
|
|
2.99
|
(1)
In October 2017,
the Company’s Board of Directors increased the option pool
from 700,000 to 1,600,000 shares.
(2)
336,544 options
vest 6/48ths at the six-month anniversary of grant date and 1/48th
per month thereafter; 21,024 options vest 6/24ths on the six-month
anniversary of grant date and 1/24th per month thereafter; and
21,024 options vest 6/42nds on the six-month anniversary of grant
date and 1/42nd per month thereafter.
(3)
32,004 options vest
as follows: options to purchase up to 12,000 shares of common stock
vest on the grant date, options to purchase up to 1,667 shares of
common stock vest on the 1st of each month thereafter. 5,000
options vest 6/48ths on the grant date and 1/48th per month
thereafter. 5,000 options vest 6/48ths on the six-month anniversary
of grant date and 1/48th per month thereafter. 320,900 options vest
6/51 at the six-month anniversary of vesting commencement date and
1/51 per month thereafter, with vesting commencing on October 1,
2018. 104,400 options vest quarterly over 5 quarters, with the
first quarter commenced on October 1, 2018. 20,000 options vest as
follows: options to purchase up to 1,667 shares of common stock
vest on January 31, 2019 and the last day of each month
thereafter.
(4)
Forfeited options
resulted from an employee termination.
A
summary of options outstanding as of December 31, 2018 is shown
below:
Exercise Prices
|
|
Numberof Shares Outstanding
|
|
Weighted Average Remaining Contractual Term
|
|
Number of Shares Fully Vested and Exercisable
|
|
Weighted Average Remaining Contractual Term
|
$0.001
|
|
555,520
|
|
7.7 years
|
|
406,280
|
|
7.6 years
|
$6.00
|
|
550,376
|
|
9.5 years
|
|
58,910
|
|
8.9 years
|
|
|
1,105,896
|
|
|
|
465,190
|
|
|
During
the years ended December 31, 2018 and 2017, the Company recognized
$232,625 and $26,864 of employee and non-employee director
stock-based compensation expense as general and administrative
expenses, respectively, and $171,238 and $26,499 as research and
development expenses, respectively. The compensation expense is
allocated on a departmental basis, based on the classification of
the option holder. No income tax benefits have been recognized in
the consolidated statements of operations and comprehensive loss
for stock-based compensation arrangements.
F-34
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
The
Company recognizes as an expense the fair value of options granted
to persons who are neither employees nor directors. Stock-based
compensation expense for non-employees for the years ended December
31, 2018 and 2017 was $125,469 and $251,842, respectively, of which
$125,469 and $199,769, respectively, was recorded as research and
development expenses and $0 and $52,073, respectively, as general
and administrative expenses.
The
fair value of options granted from inception to December 31, 2018
was based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 1.2% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date is
estimated using the simplified method. For the years ended December
31, 2018 and 2017: the weighted-average grant date fair value was
$2.05 and $0.88 per share, respectively; and the fair value of
shares vested was $391,689 and $312,895, respectively. At December
31, 2018, the aggregate intrinsic value was approximately $3.3
million of which approximately $2.4 million was vested and
approximately $0.9 million is expected to vest and the
weighted-average exercise price in aggregate was $2.99 which
includes $0.76 for fully vested stock options and $4.60 for stock
options expected to vest. At December 31, 2018, unamortized
unvested balance of stock base compensation was $2.2 million, to be
amortized over 2.9 years.
Note 5 - Development and Collaboration Agreements
Onxeo SA
The
pre-negotiated Onxeo license agreement for Validive included as
part of the option agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5 - 10%. On September 8, 2017, the
Company exercised the option, and therefore was required to pay
Onxeo the $1 million fee under the option and license
agreement.
Under
the agreement, the Company is required to pay royalties to Onxeo on
a product-by-product and country-by-country basis until the later
of (1) the date when a given product is no longer within the scope
of a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever the Company’s royalty payment
obligations with respect to such product have expired. The
agreement may also be terminated early for cause if either the
Company or Onxeo materially breach the agreement, or if either the
Company or Onxeo become insolvent. The Company may also choose to
terminate the agreement, either in its entirety or as to a certain
product and a certain country, by providing Onxeo with advance
notice.
The
Company plans to internally develop Validive with the near-term
goal of commencing a Phase 3 clinical trial which, if successful,
may allow the Company to apply for marketing approval within the
next few years. The Company will need to raise significant funds to
support the further development of Validive. As of December 31,
2018, the Company had not reached any of the pre-specified
milestones and has not been required to pay Onxeo any funds under
this license agreement.
F-35
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 that could reach up to $14.925 million if
the Company achieves all milestones. The agreement does not require
the payment of sales royalties. There can be no assurance that the
Company will reach any milestones. As of December 31, 2018, the
Company has not reached any milestones and has not been required to
pay XOMA Ltd. any funds under this license agreement.
Note 6 - The Gem Transaction
On
August 25, 2017, the Company executed definitive agreements with
Gem Pharmaceuticals, LLC (“Gem”), pursuant to which Gem
formed a limited liability company, TacticGem LLC
(“TacticGem”) with Tactic Pharma, the Company’s
largest shareholder at that time. Gem contributed certain of
Gem’s drug candidates’ intellectual property and
agreements associated primarily with Gem’s GPX-150 (renamed
camsirubicin) drug candidate
program, along with $5,000,000 in cash (the “Gem Contributed
Assets”) to TacticGem for a 42.633% interest, and Tactic
Pharma contributed 4,111,273 shares of common stock of Monopar to
TacticGem for a 57.367% interest. Then, TacticGem contributed the
Gem Contributed Assets to the Company in exchange for 3,055,394
newly issued shares of common stock of the Company (31.4% on a
fully-diluted basis) (the two contributions collectively, the
“Gem Transaction”). The Gem Transaction closed on
August 25, 2017. Following the Gem Transaction, TacticGem owns
7,166,667 (77.1%) shares of Monopar’s common stock as of
December 31, 2018.
The
transaction was recorded as an asset acquisition on August 25, 2017
as follows:
Cash
recorded on the Company’s Balance Sheet
|
$5,000,000
|
Assembled
Workforce recorded as In-process Research and Development Expense
on
the Company’s Statement of Operations and Comprehensive
Loss
|
9,886
|
Camsirubicin
(GPX-150) recorded as In-process Research and Development Expense
on
the Company’s Statement of Operations and Comprehensive
Loss
|
13,491,736
|
Total
Gem Transaction
|
$18,501,622
|
Within
90 days of the effective date of the transaction, the Company was
required to use its best efforts to file a Form 10 to register its
common stock under the Securities Exchange Act of 1934. The Company
filed its Form 10 on November 9, 2017. Additionally, the limited
liability company agreement of TacticGem provides that the Manager
of TacticGem is required to vote TacticGem’s shares of our
common stock to elect Tactic Pharma’s nominees plus one
person designated by Gem to our Board. The Gem board nomination
right terminates at such time as we achieve a listing on a national
stock exchange. Gem’s initial designee for election to our
Board is Arthur Klausner, former CEO of Gem. Also, Richard Olson
and Gerald Walsh, former CSO and former President of Gem,
respectively, had been retained with one-year consulting agreements
to aid in an efficient transfer of Gem’s GPX-150 (renamed
camsirubicin) and associated
programs.
During
the year ended December 31, 2018, the Company’s annual cash
burn increased by approximately $100,000 due to the addition of the
Gem Assets, and future cash burn will be significantly higher when
the Company chooses to conduct clinical trials with the Gem drug
candidate programs.
F-36
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Note 7 - Related Party Transactions
In
March 2017, Tactic Pharma, the Company’s largest shareholder
at that time, wired $1 million to the Company in advance of the
sale of the Company’s common stock at $6 per share under a
private placement memorandum. In April, the Company issued to
Tactic Pharma 166,667 shares in exchange for the $1 million at $6
per share once the Company began selling stock to unaffiliated
parties under the private placement memorandum.
In
August 2017, Tactic Pharma surrendered 2,888,727 shares of common
stock back to the Company as a contribution to the capital of the
Company. This resulted in reducing Tactic Pharma’s ownership
in Monopar at the time from 79.5% to 69.9%.
In
August 2017, the Company executed definitive agreements with Gem,
pursuant to which Tactic Pharma and Gem formed a limited liability
company, TacticGem. Tactic Pharma contributed 4,111,273 shares of
its holdings in Monopar’s common stock to TacticGem and Gem
contributed cash and assets to TacticGem. TacticGem then
contributed cash and assets to the Company in exchange for stock.
As of December 31, 2018, Tactic Pharma beneficially owned 46% of
Monopar’s common stock, and TacticGem owned 77% of
Monopar’s common stock.
During
the years ended December 31, 2018 and 2017, the Company was advised
by four members of its Board of Directors, who were Managers of the
LLC prior to the Company’s conversion to a C Corporation. The
four former Managers are also current common stockholders (owning
approximately an aggregate 3% of the common stock outstanding as of
December 31, 2018). Three of the former Managers are also Managing
Members of Tactic Pharma as of December 31, 2018. Monopar paid
Managing Members of Tactic Pharma and the Manager of CDR Pharma,
LLC, which is the Manager of TacticGem the following: Chandler D.
Robinson, the Company’s Co-Founder, Chief Executive Officer,
common stockholder, Managing Member of Tactic Pharma, former
Manager of the predecessor LLC, and the Manager of CDR Pharma, LLC:
$430,000 and $346,545 for the years ended December 31, 2018 and
2017, respectively; and Andrew P. Mazar, the Company’s
Co-Founder, Chief Scientific Officer, common stockholder, Managing
Member of Tactic Pharma and former Manager of the predecessor LLC,
$405,000 and $89,481 for the years ended December 31, 2018 and
2017, respectively. In addition, Dr. Mazar was paid $225,000 in
consulting fees for the year ended December 31, 2017. The Company
also paid Christopher M. Starr, the Company’s Co-Founder,
Executive Chairman of the Board of Directors, common stockholder
and former Manager of the predecessor LLC $105,673 and $100,897 in
board fees for the years ended December 31, 2018 and 2017,
respectively. Michael Brown, as a managing member of Tactic Pharma
until February 1, 2019, a previous managing member of Monopar as an
LLC and common stockholder and board member of Monopar as a C
Corporation was paid $45,500 and $20,000 for the years ended
December 31, 2018 and 2017, respectively.
For the
year ended December 31, 2018, $102,760 of fees paid to or accrued
for a large national law firm, in which a family member of the
Company’s Chief Executive Officer is a law partner, were
recorded as deferred offering costs and $49,334 as legal expense
for a total of $152,094. For the year ended December 31, 2017,
$110,341 of fees accrued for, or paid to, this law firm was
recorded as deferred offering costs, $13,076 as legal expense,
$31,500 as fundraising costs (contra equity) and $134,258 as Gem
transaction cost recorded as in-process research and development
expense for a total of $289,175. The family member personally
billed a de minimis amount
of time on the Company’s legal engagement with the law firm
in these periods.
Note 8 – Income Taxes
ASC 740
requires that the tax benefit of net operating losses, temporary
differences, and credit carryforwards be recorded as an asset to
the extent that management assesses that realization is "more
likely than not." Realization of the future tax benefits is
dependent on the Company's ability to generate sufficient taxable
income within the carryforward period. The Company has reviewed the
positive and negative evidence relating to the realizability of the
deferred tax assets and has concluded that the deferred tax assets
are not more likely than not to be realized with the exception of
$75,973 and $4,358 of U.S. Federal R&D tax credits for the
years ended December 31, 2018 and 2017, respectively. The 2018 tax
credit of $71,615 will be utilized to reduce payroll taxes in 2019.
The tax credit generated in 2017 in the amount of $4,358 will also
be claimed to offset payroll taxes in 2019. Accordingly, the
valuation allowance has not been released related to these assets
with the exception of $75,973 and $4,358 in U.S. Federal R&D
tax credits for the years ended December 31, 2018 and 2017,
respectively. The valuation allowance increased by approximately
$690,000 and $466,000 during the years ended December 31, 2018 and
2017, respectively.
F-37
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
The
provision for income taxes for December 31, 2018 and 2017 consists
of the following:
|
|
|
|
|
Current:
|
|
|
Federal
|
$—
|
$—
|
State
|
—
|
—
|
Total
current
|
—
|
—
|
Deferred:
|
|
|
Federal
|
(71,615)
|
—
|
State
|
—
|
—
|
Total
deferred
|
(71,615)
|
—
|
Full valuation
allowance
|
|
|
Total
provision
|
$(71,615)
|
$—
|
The
difference between the effective tax rate and the U.S. federal tax
rate is as follows:
|
|
Federal income
tax
|
21.00%
|
State income taxes,
less federal benefit
|
0.78%
|
Tax
Credits
|
1.87%
|
Permanent
differences
|
-0.13%
|
Change in valuation
allowances
|
-20.92%
|
Other
|
-0.43%
|
Effective Tax Rate
Benefit (expense)
|
2.17%
|
F-38
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
Deferred tax assets
and liabilities consist of the following:
|
|
As of December 31,
|
|
|
2018
|
|
2017
|
Deferred tax assets:
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
467,186
|
|
$ 186,019
|
Tax
credit carryforwards
|
|
107,969
|
|
30,143
|
Stock
compensation
|
|
138,111
|
|
58,536
|
Intangible
asset basis differences
|
|
1,053,518
|
|
730,647
|
Gross
deferred tax assets
|
|
1,766,784
|
|
1,005,345
|
Valuation
allowance
|
|
(1,690,811)
|
|
(1,000,987)
|
Total
deferred tax assets, net of valuation
allowance
|
|
75,973
|
|
4,358
|
Deferred tax liabilities:
|
|
|
|
|
Net
deferred tax liability
|
|
—
|
|
—
|
Net
deferred taxes
|
|
$
75,973
|
|
$ 4,358
|
As of
December 31, 2018, Company had total federal net operating loss
carryforwards of approximately $2,132,000. The $820,000 will begin
to expire in 2035, and the $1,312,000 will carry forward
indefinitely for federal tax purposes. At December 31, 2018, the
Company had state net operating loss carryforwards of approximately
$259,000 which will begin to expire in 2027. The net operating loss
related deferred tax assets do not include excess tax benefits from
employee stock option exercises.
As of
December 31, 2018, Company had R&D credit carryforwards of
approximately $76,000 and $40,000 available to reduce future
taxable income, if any, for both federal and state income tax
purposes, respectively. The federal credit of $76,000 may be able
to reduce future payroll taxes. The federal R&D credit
carryforwards expire beginning 2035 and Illinois R&D credit
carryforwards expire beginning 2020. The federal credit has been recorded
as a deferred tax asset included as a component of prepaid expenses
and other current assets in our consolidated balance
sheet.
The Tax
Reform Act of 1986 limits the use of net operating carryforwards in
certain situations where changes occur in the stock ownership of a
company. In the event the Company has had a change in ownership,
utilization of the carryforwards could be limited. The Company has
not performed such a study.
On
January 1, 2015, the Company adopted the provisions of FASB
Accounting Standards Codification (ASC 740-10), Accounting for Uncertainty in Income
Taxes. ASC 740-10 prescribes a comprehensive model for the
recognition, measurement, presentation and disclosure in financial
statements of any uncertain tax positions that have been taken or
expected to be taken on a tax return. The cumulative effect of
adopting ASC 740-10 resulted in no adjustment to retained earnings
as of December 31, 2018. It is Company's policy to include
penalties and interest expense related to income taxes as a
component of other expense and interest expense, respectively, as
necessary.
No
liability related to uncertain tax positions is recorded on the
financial statements related to uncertain tax positions. There are
no unrecognized tax benefits as of December 31, 2018. The Company
does not expect that uncertain tax benefits will materially change
in the next 12 months.
Company
files U.S. federal, California and Illinois State tax returns.
Company is subject to California State minimum franchise taxes. All
tax returns will remain open for examination by the federal and
state taxing authorities for three and four years, respectively,
from the date of utilization of any net operating loss
carryforwards or R&D credits. In addition, due to the new
operations in certain foreign countries, the Company became subject
to local tax laws of such countries. Nonetheless, as of December
31, 2018, due to the insignificant expenditures in such countries,
there was no material tax effect to the Company’s 2018
consolidated financial statements.
F-39
MONOPAR THERAPEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2018
On
December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”)
of 2017 was enacted by the U.S. President. The Tax Cuts and Jobs
Act of 2017 is effective as of January 1, 2018. In accordance with
ASC guidance, deferred tax assets/liabilities in the
Company’s financial statements are to be reflected at the tax
rate in which the deferred tax assets/liabilities are anticipated
to be realized. As a result, the Company changed the tax rate for
tax provision purposes commencing on December 31, 2017 from 34% to
21%. This resulted in a reduction of the value of the
Company’s deferred tax asset balances in the amount of
approximately $176,000. The Company completed the accounting for
revaluation of deferred taxes at the new corporate tax rate and did
not make any adjustment to the tax impact reported in 2017. The
Company appropriately reflected any tax effects by the provisions
included in the TCJA. Such effects are immaterial to the
Company’s 2018 consolidated financial statement.
Note
9 – Commitments and Contingencies
Development
and Collaboration Agreements
Onxeo S.A.
The
Onxeo license agreement for Validive includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. During the years ended
December 31, 2018 and 2017, the Company had not reached any
milestones and has not been required to pay Onxeo any funds under
this license agreement.
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma to the
Company included the non-exclusive license agreement with XOMA Ltd.
for the humanization technology used in the development of
MNPR-101. Pursuant to such license agreement, the Company is
obligated to pay XOMA Ltd. clinical, regulatory and sales
milestones for MNPR-101 and zero royalties. During the years ended
December 31, 2018 and 2017, the Company had not reached any
milestones and has not been required to pay XOMA Ltd. any funds
under this license agreement.
Leases
Commencing January
1, 2018, the Company entered into a lease for its executive
headquarters at 1000 Skokie Blvd., Suite 350, Wilmette, Illinois.
The lease term is January 1, 2018 through December 31, 2019. The
Company also leased office space in Seattle, Washington, from
November 1, 2017 to July 31, 2018. The future lease commitments as
presented below represent amounts for the Company’s lease of
its executive headquarters.
2019
|
|
$30,234
|
Thereafter
|
|
-
|
Total
future lease payments
|
|
$30,234
|
Legal
Contingencies
The
Company may be subject to claims and assessments from time to time
in the ordinary course of business. No claims have been asserted to
date.
Indemnification
In the
normal course of business, the Company enters into contracts and
agreements that contain a variety of representations and warranties
and provide for general indemnification. The Company’s
exposure under these agreements is unknown because it involves
claims that may be made against the Company in the future, but that
have not yet been made. To date, the Company has not paid any
claims or been required to defend any action related to its
indemnification obligations. However, the Company may record
charges in the future as a result of these indemnification
obligations.
In
accordance with its amended and restated certificate of
incorporation and bylaws, the Company has indemnification
obligations to its officers and directors for certain events or
occurrences, subject to certain limits, while they are serving at
the Company’s request in such capacity. There have been no
claims to date.
F-40
2,222,223
shares
Common
Stock
Monopar Therapeutics Inc.
PROSPECTUS
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JonesTrading
|
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|
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Aegis
Capital Corp.
|
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Arcadia
Securities
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,
2019
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses Of Issuance And Distribution
The following table sets forth the fees and expenses, other than
underwriting discounts and commissions, payable by us in connection
with the registration of our common stock hereunder. All amounts
are estimates except the SEC registration fee and FINRA filing
fee.
|
|
SEC Registration
fee
|
$ 3,097
|
Legal fees and
expenses
|
300,000
|
FINRA filing
fee
|
4,333
|
Nasdaq listing
fee
|
50,000
|
Accounting fees and
expenses
|
60,000
|
Printing
expenses
|
5,000
|
Transfer agent fees
and expenses
|
1,000
|
Miscellaneous
|
26,570
|
Total
|
$450,000
|
Item 14. Indemnification of Directors and Officers
Delaware Law
Section
102 of the General Corporation Law of the State of Delaware permits
a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director, except where
the director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an
improper personal benefit.
Section 145 of the General Corporation Law of the
State of Delaware provides that a corporation has the power to
indemnify a director, officer, employee, or agent of the
corporation, or a person serving at the request of the corporation
for another corporation, partnership, joint venture, trust or other
enterprise in related capacities against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with
an action, suit or proceeding to which he was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of such position, if
such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, in any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, except that,
in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any
claim, issue or matter as to
which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or other adjudicating court determines that, despite the
adjudication of liability but in view of all of the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Second Amended and Restated Certificate of
Incorporation
●
Our
Certificate of Incorporation provides that we are required to
provide indemnification and advancement of expenses to our
directors, officers or other agents to the fullest extent permitted
by Delaware's General Corporation Law. Our Certificate of
Incorporation limits the personal liability of directors for breach
of fiduciary duty to the maximum extent permitted by the Delaware
General Corporation Law and provides that no director will have
personal liability to us or to our stockholders for monetary
damages for breach of fiduciary duty or other duty as a director.
However, these provisions do not eliminate or limit the liability
of any of our directors for any breach of the director's duty of
loyalty to us or our stockholders;
●
or
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, fraud, or gross
negligence;
●
for
voting for or assenting to unlawful payments of dividends, stock
repurchases or other distributions; or
●
for
any transaction from which the director derived an improper
personal benefit.
In
addition, our Certificate of Incorporation provides that, to the
fullest extent permitted by Delaware’s General Corporation
Law, we will indemnify each person who was or is a party or
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, other than an action by or in
the right of the Company, by reason of the fact that he or she is
or was, or has agreed to become, a director or officer, or is or
was serving, or has agreed to serve, at our request as a director,
officer, partner, employee or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to as an
"Indemnitee"), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action,
suit or proceeding and any appeal therefrom, if such Indemnitee
acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, our best interests, and, with respect
to any criminal action or proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful.
Indemnification Agreements
We
have entered into a consulting agreement with our officer Patrice
Rioux (through pRx Consulting, LLC) pursuant to which we have
agreed to indemnify pRx Consulting, LLC from and against all
liabilities, losses, damages, expenses, charges and fees which it
may sustain or incur by reason of any claim which may be asserted
against pRx Consulting, LLC arising out of or attributable to us or
our employees or contractors.
Insurance
We
maintain a general liability insurance policy that covers certain
liabilities of directors and officers of our corporation arising
out of claims based on acts or omissions in their capacities as
directors or officers. Concurrent with our stock commencing public
trading, we plan to obtain directors and officers insurance that
will cover potential claims against us and our officers and
directors related to securities and corporate governance
lawsuits.
Underwriting Agreement
In the underwriting agreement that we enter into in connection with
the sale of shares of our Common Stock in this offering, a form of
which will be filed as Exhibit 1.1 to this registration statement,
there will be provisions for indemnification of us and our
directors and officers by the underwriters against certain
liabilities under the Securities Act and the Exchange
Act.
Item
15. Recent Sales of Unregistered Securities
Set
forth below is information regarding shares of common stock issued
and options granted by us since our formation in December 2014,
that were not registered under the Securities Act. Also included is
the consideration, if any, received by us, for such shares and
options and information relating to the Securities Act, or rule of
the SEC, under which exemption from registration was claimed. No
underwriters were involved in these issuances of securities. Below
this description of recent sales of unregistered securities and
option grants is a description of the exemptions from registration
which were applicable to each sale or grant.
(a) In
December 2014, 1,000,000 Common Class Z Units of Monopar
Therapeutics, LLC, our predecessor entity, were sold to Tactic
Pharma, LLC in exchange for the contribution of all intellectual
property rights related to MNPR-101, valued at $30 per Unit. These
Units were converted into 100,000 shares of Series Z Preferred
Stock when we converted to a corporation on December 16, 2015, and
were further converted into 7,000,000 shares of our Common Stock
pursuant to the “Conversion” in March 2017. This was a
private placement of Securities to a single owner upon the
formation of the Company, and the Units were sold pursuant to the
exemption from registration under the Act, set forth in Section
4(a)(2) of the Act.
(b) In
May and June 2015, 116,438 Preferred Class A Units of Monopar
Therapeutics, LLC, our predecessor entity, were sold to accredited
investors at a price of $30 per Unit. These Units were converted
into 11,643.8 shares of Series A Preferred Stock when we converted
to a corporation on December 16, 2015 and were further converted
into 978,079.3 shares of our Common Stock pursuant to the
“Conversion” in March 2017.
(c)
During March and April 2016, 4,250 shares of Series A Preferred
Stock were sold to accredited investors, at a price of $300 per
share (after a 10:1 split of the previous shares). These shares
were converted into 357,000 shares of our Common Stock pursuant to
the “Conversion” in March 2017.
(d) On
April 4, 2016, we granted stock options for 1,200 shares of our
Common Stock to each of Dr. Christopher M. Starr, Dr. Chandler D.
Robinson, and Dr. Andrew P. Mazar in exchange for services.
Pursuant to the “Conversion” in March 2017, these
options were each adjusted to be for 84,000 shares. On the same
date, we granted a stock option for 300 shares of our Common Stock
to Kim R. Tsuchimoto in exchange for services, which was adjusted
to be for 21,000 shares pursuant to the Conversion. The exercise
price of each of these stock options was $0.001 per share and the
stock options expire on April 3, 2026.
(e) On
December 15, 2016, we granted an option for 100 shares of our
Common Stock to Dr. Patrice P. Rioux in exchange for services.
Pursuant to the “Conversion” in March 2017, the option
was adjusted to be for 7,000 shares. The exercise price of the
option was $0.001 per share and the option expires on December 14,
2026.
(f) On
February 20, 2017, we granted stock options for 1,200 shares of our
Common Stock to each of Dr. Christopher M. Starr, Dr. Chandler D.
Robinson, and Dr. Andrew P. Mazar in exchange for services.
Pursuant to the “Conversion” in March 2017, these stock
options were each adjusted to be for 84,000 shares. On the same
date, we granted a stock option for 336 shares of our Common Stock
to Kim R. Tsuchimoto in exchange for services, which was adjusted
to be for 23,520 shares pursuant to the Conversion. The exercise
price of each of these options was $0.001 per share and the options
expire on February 19, 2027.
(g)
During March 2017 through June 2017, 340,840.33 shares of Common
Stock were sold to accredited investors at a price of $6.00 per
share.
(h)
During August 2017 through September 2017, 448,834 shares of Common
Stock were sold to accredited investors at a price of $6.00 per
share.
(i) On
August 25, 2017, 3,055,394.12 shares of our Common Stock were
issued to TacticGem in exchange for the Gem Contributed Assets
(including assets and $5 million in cash) as part of the Gem
Transaction.
(j) On
September 1, 2017, we granted options for 21,024 shares of Common
Stock to Arthur J. Klausner, and on September 18, 2017, we granted
options for 21,024 shares of Common Stock to each of Michael J.
Brown and Raymond W. Anderson, in exchange for services as
Directors. The exercise price of the options was $6.00 per share
and the options expire on August 31, 2027 and September 17, 2027,
respectively.
(k) On
November 1, 2017, we granted options for 40,000 shares of Common
Stock to Kirsten Anderson in exchange for services. The exercise
price of the options was $6.00 per share and the options original
expiry was October 31, 2027. As
of June 20, 2018, Ms. Anderson is no longer with the Company, and
upon termination of her employment, options to purchase up to
34,167 shares of our Common Stock immediately
expired.
(l) On January 1, 2018, we granted options for 32,004 shares of
Common Stock to Patrice Rioux in exchange for services. The
exercise price of the option was $6.00 per share and the options
expire on December 31, 2027.
(m) On
May 21, 2018, we granted options for 5,000 shares of Common Stock
to an employee in exchange for services. The exercise price of the
options was $6.00 per share and the options expire on May 20,
2028.
(n) On
August 6, 2018, we granted options for 5,000 shares of Common Stock
to an employee in exchange for services. The exercise price of the
options was $6.00 per share and the options expire on August 5,
2028.
(o) On
August 28, 2018, we granted options for 320,900 shares of common
stock to our officers for services. The exercise price of the
options was $6.00 per share and the options expire on August 27,
2028.
(p) On
August 28, 2018, we granted options for 104,400 shares of common
stock to our non-employee directors for services. The exercise
price of the options was $6.00 per share and the options expire on
August 27, 2028.
(q) On
December 30, 2018, we
granted options for 20,000 shares of common stock to Patrice Rioux
in exchange for services. The exercise price of the option was
$6.00 per share and the options expire on December 29,
2028.
The
offers, sales and issuances of the securities described in
paragraphs (d), (e), (f), (j), (k), (l), (m), (n), (o), (p) and (q)
were deemed to be exempt from registration under the Securities Act
in reliance on both Section 4(a)(2) of the Act and Rule 701 in that
the transactions were under compensatory benefit plans and
contracts relating to compensation as provided under Rule 701. The
recipients of such securities were our employees, officers, bona
fide consultants and advisors and received the securities under our
Plan. Appropriate legends were affixed to the securities issued in
these transactions. Each of the recipients of securities in these
transactions had adequate access, through employment, business or
other relationships, to information about us and had knowledge and
experience to make the decision to accept the stock
options.
The
offers, sales and issuances of the securities described in
paragraph (b), (c), (g), (h), and (i) were deemed to be exempt from
registration under the Securities Act in reliance on Rule 506(b) of
Regulation D in that the issuance of securities to the accredited
investors did not involve a public offering. The recipients of
securities in each of these transactions acquired the securities
for investment only and not with a view to or for sale in
connection with any distribution thereof. Each of the recipients of
securities in these transactions was an accredited investor under
Rule 501 of Regulation D. Form D was filed related to the issuance
of securities described in paragraph (b) on June 18, 2015; Form D
was filed related to the issuance of securities described in
paragraph (c) on June 18, 2015; Form D was filed related to the
issuance of securities described in paragraph (g) on March 28,
2017; and Form D was filed related to the issuance of securities
described in paragraph (h) on August 23, 2017.
Item
16. Exhibits and Financial Statement Schedules
(a)
Exhibit Index
|
Document
|
1.1
|
Form of
Underwriting Agreement**
|
3.1
|
Second Amended and
Restated Certificate of Incorporation**
|
3.2
|
Amended and
Restated Bylaws**
|
4.1
|
Form of Stock
Certificate**
|
5.1
|
Opinion of
Counsel
|
10.1*
|
License Agreement
with XOMA (US) LLC**
|
10.2*
|
Option and License
Agreement with Onxeo S.A.**
|
10.3*
|
Contribution
Agreement (351) – Containing Registration Rights Agreement
with TacticGem**
|
10.4
|
Amended and
Restated 2016 Stock Incentive Plan**
|
10.5
|
Employment
Agreement of Chandler D. Robinson – effective November 1,
2017#**
|
10.6
|
Employment
Agreement of Kim Tsuchimoto – effective November 1,
2017#**
|
10.7
|
Employment
Agreement of Andrew P. Mazar – effective November 1,
2017#**
|
10.8
|
Amendment One to Employment Agreement of Kim Tsuchimoto –
effective March 1, 2018#**
|
23.1
|
Consent of
Independent Registered Public Accounting Firm
|
23.2
|
Consent of Legal
Counsel (included in Exhibit 5.1)
|
|
|
Confidential
Information has been omitted and filed separately with the
Securities and Exchange Commission on exhibits marked with (*).
Confidential treatment has been approved with respect to the
omitted information, pursuant to an Order dated January 8,
2018.
#
Management compensation arrangement
** Previously
filed
(b)
Financial Statements Schedules:
Schedules have been
omitted because the information required to be set forth therein is
not applicable or is shown in the financial statements or notes
thereto included elsewhere in this registration
statement.
Item
17. Undertakings
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue
The
undersigned registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering
thereof.
SIGNATURES
Pursuant to the
requirements of Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Wilmette,
State of Illinois, on this
4th
day of November, 2019.
|
Monopar Therapeutics
Inc.
|
|
|
|
|
By:
|
/s/ Chandler D.
Robinson
|
|
|
Name: Chandler D.
Robinson
|
|
|
Title: Chief
Executive Officer and Director
|
Pursuant to the
requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures
|
|
Title
|
|
Date
|
/s/
Chandler D. Robinson
|
|
|
|
November
4, 2019
|
Chandler
D. Robinson
|
|
Chief
Executive Officer and Director (Principal Executive
Officer)
|
|
|
/s/ Kim
R. Tsuchimoto
|
|
|
|
November
4, 2019
|
Kim R.
Tsuchimoto
|
|
Chief
Financial Officer (Principal Financial and Accounting
Officer)
|
|
|
*
|
|
|
|
November
4, 2019
|
Andrew
P. Mazar
|
|
Chief
Scientific Officer and Director
|
|
|
*
|
|
|
|
November
4, 2019
|
Christopher
M. Starr
|
|
Executive
Chairman of the Board and Director
|
|
|
*
|
|
|
|
November
4, 2019
|
Raymond
W. Anderson
|
|
Director
|
|
|
*
|
|
|
|
November
4, 2019
|
Michael
J. Brown
|
|
Director
|
|
|
*
|
|
|
|
November
4, 2019
|
Arthur
J. Klausner
|
|
Director
|
|
|
|
|
*
By:
|
/s/ Chandler D.
Robinson
|
|
Chandler D.
Robinson
|
|
Attorney-in-fact
|