Business Context and Reporting Period
Monopar Therapeutics Inc. filed this Form 10-Q for the quarter ended June 30, 2018. The clinical-stage oncology company reported no product revenue and was focused on developing three candidates: Validive, MNPR-201 and MNPR-101.
- Validive was described as Phase 3-ready for prevention and treatment of severe oral mucositis in oropharyngeal cancer patients. Management planned to begin a Phase 3 program in early 2019, following a May 2018 FDA meeting.
- MNPR-201 had completed a Phase 2 sarcoma trial; management planned further Phase 2 development.
- MNPR-101 was pre-IND. IND-enabling work was nearly complete, but a clinical-material manufacturer and potential alternative collaborators remained to be secured.
Financial Results and Liquidity
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $493,000 | $950,000 | $312,000; $445,000 |
| General and administrative expense | $347,000 | $787,000 | $283,000; $523,000 |
| Net loss | $821,000 | $1.697 million | $591,000; $964,000 |
| Net loss per share, basic and diluted | $0.09 | $0.18 | $0.07; $0.11 |
For the quarter and six-month periods, respectively, operating expenses rose by approximately $245,000 and $769,000 year over year. The company attributed the increases primarily to staffing and compensation, stock-based compensation, public-company costs, and support for Validive development. No clinical trials were in progress during the periods.
- Cash and cash equivalents were $7.419 million at June 30, 2018, versus $8.982 million at December 31, 2017. Restricted cash was $800,031, held in escrow; total cash, cash equivalents and restricted cash were $8.219 million.
- Six-month operating cash use was $1.562 million, compared with $617,000 in 2017. There were no investing cash flows and no financing proceeds in the 2018 period; 2017 financing cash flows included $2.025 million from common-stock sales.
- Total assets were $8.447 million, total liabilities $323,000, and stockholders’ equity $8.124 million. The balance sheet reported no debt. Operating margins are not meaningful given zero revenue.
- Accumulated deficit was $20.1 million. Management stated that available funds were expected to cover minimum or minimal operations through August 2019, but additional funding would be needed for planned development.
Material Changes, Outlook and Risks
- On March 21, 2018, Cancer Research UK notified Monopar that it was closing its MNPR-101 project and terminating the collaboration; transfer of generated data was expected. The $800,000 escrow balance was expected to be released after termination, anticipated in September 2019.
- Management expected research and development and general and administrative expenses to increase, particularly in the second half of 2018 and 2019 as the company prepared for Validive Phase 3 development. The company said it might need to raise capital within 12 months if spending accelerated, including through acquisitions or additional clinical programs.
- Management identified equity offerings, debt financing, collaborations and grants as potential funding sources. Financing may dilute shareholders, impose debt covenants, or require the company to surrender rights or revenue potential.
- Validive’s Onxeo agreement includes potential milestones of up to $108 million and royalties of 5%–10% on net sales. The XOMA license for MNPR-101 includes potential milestones of up to $14.925 million and no sales royalties. No milestones or royalties were earned or payable in the reported periods.
- The company disclosed related-party payments to executives and directors and legal fees paid or accrued to a law firm where the CEO’s family member is a partner. Tactic Pharma and TacticGem together owned approximately 77% of the company as of June 30, 2018.
- No material legal proceedings or off-balance-sheet arrangements were reported. Management concluded disclosure controls were effective as of June 30, 2018, with no material changes to internal control over financial reporting reported for the period.
Important Facts for Investors to Verify
- Whether Validive’s planned Phase 3 trials proceed on the stated timetable, and the design, cost, enrollment and regulatory requirements.
- Whether the company secures sufficient funding beyond its stated runway for minimum operations through August 2019, including the effect of any financing on shareholders.
- Completion and timing of the Cancer Research UK termination, data transfer and release of the $800,000 escrow.
- Development plans, clinical evidence and funding or collaboration arrangements for MNPR-201 and MNPR-101.
- Potential future milestone and royalty obligations under the Onxeo and XOMA agreements, and the implications of concentrated ownership and related-party transactions.