Moleculin Biotech, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial amounts below are in U.S. dollars; income statement and cash flow amounts are rounded to millions. Moleculin is a clinical-stage pharmaceutical company developing drug candidates for resistant cancers and viruses. It had no revenue in the periods presented.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $4.2m | $3.0m | $8.8m | $7.1m |
| General and administrative expense | $3.2m | $2.4m | $5.6m | $4.4m |
| Total operating expenses | $7.4m | $5.5m | $14.5m | $11.6m |
| Net loss | $6.8m | $4.2m | $13.6m | $8.7m |
| Net loss per share | $0.24 | $0.15 | $0.48 | $0.35 |
| Cash used in operating activities | Not stated quarterly | Not stated quarterly | $12.8m | $10.4m |
At June 30, 2022, cash and cash equivalents were $58.0m, down from $70.9m at December 31, 2021. Current assets were $61.3m and current liabilities $5.9m; total liabilities were $6.9m and stockholders’ equity $66.4m. The filing does not provide a clear conventional debt balance; reported liabilities include accounts payable, accrued expenses, lease liabilities and $0.6m of warrant liability. Cash used in investing activities was $0.1m and cash used in financing activities was $0.01m in the first half.
No meaningful operating margin is available because the company had no revenue and reported operating losses. The $0.8m first-half gain from revaluing warrant liabilities reduced reported loss but was a fair-value accounting item, not operating cash generation.
Changes versus prior comparable periods
- Q2 net loss increased to $6.8m from $4.2m; first-half net loss increased to $13.6m from $8.7m. First-half operating cash use rose to $12.8m from $10.4m.
- First-half R&D expense rose $1.7m, primarily reflecting increased clinical-trial activity, drug-product manufacturing costs and a license termination fee. G&A rose $1.2m, mainly from regulatory and legal services, consulting and advisory fees.
- First-half financing provided $74.7m in 2021, primarily from stock offerings, versus a $0.01m outflow in 2022; the company reported no stock sales in the first half of 2022.
- Cash declined by $12.9m during the first half of 2022. The warrant-liability fair-value gain was smaller than in 2021 ($0.8m versus $2.8m for the first half).
Business developments, outlook and risks
- The pipeline comprises six candidates across Annamycin, the WP1066 portfolio and the WP1122 portfolio; the company reported that three had shown human activity in clinical trials. It outsources manufacturing and has no sales organization, and expects to pursue licensing or strategic partners for development and commercialization.
- After quarter-end, the company reported that Annamycin’s U.S. soft-tissue sarcoma lung-metastasis study completed Phase 1b and opened Phase 2 recruitment. The safety review deemed 390 mg/m² safe, but tolerability issues led the company to set 360 mg/m² as the initial Phase 2 dose, subject to review. Preliminary patient observations were expressly described as early-stage and subject to change.
- The company received Polish approvals to proceed with a Phase 1/2 Annamycin-plus-cytarabine AML study, expected to begin enrollment in Q3 2022. FDA clearance for a Phase 1 WP1066 recurrent malignant glioma study was received; the company said it was evaluating partners and collaborations to conduct it.
- WP1122 began a UK Phase 1a healthy-volunteer study. After quarter-end, the company reported preliminary safety and tolerability findings for the first two dose cohorts; these are early clinical findings, not demonstrated efficacy.
- Management estimated June 30 cash would fund projected operating requirements beyond Q2 2024, including a potential increase in R&D spending. This estimate depends on clinical and preclinical activity and potential legal costs. Management expects operating losses for several years and does not expect near-term positive operating cash flow; future financing may be needed, with no assurance it will be available on acceptable terms.
- In March 2022, the company received an SEC subpoena seeking information, including about certain individuals and entities and its COVID-19 drug candidate and related statements. The company said it did not know the investigation’s specific nature and could not predict the outcome. It incurred about $0.8m in related legal costs through the reporting period and estimated potentially another $2m in the second half of 2022.
- Other commitments include a $1.3m sponsored-research agreement with MD Anderson through December 2024, a $0.4m payment to terminate certain licenses, and a lab lease extended through September 2027. A $375,000 cash bonus for the CEO was approved after quarter-end, payable upon first-patient dosing in the Annamycin Phase 2 study.
- Principal stated risks include clinical-trial enrollment, safety and efficacy, regulatory approvals and delays, third-party manufacturing and supply constraints, dependence on financing and licensing partners, intellectual-property obligations, and the effects of COVID-19, the war in Ukraine and supply-chain shortages. Disclosure controls were assessed as effective at June 30, 2022; management reported no material change in internal control over financial reporting during Q2.
Important facts for investors to verify
- Whether the clinical-trial timelines, enrollment plans and Annamycin Phase 2 dose proceed as described, and how subsequent safety and efficacy data compare with preliminary observations.
- Actual cash burn, legal spending and cash runway relative to management’s estimate extending beyond Q2 2024, including the impact of planned R&D and trial activity.
- Developments and potential costs or consequences arising from the SEC subpoena and any further information requests or actions.
- Whether WP1066 can secure the resources or partners needed to start its cleared study, and whether licensing discussions and sublicensee development produce funding or other benefits.
- The timing and terms of any future capital raising, and the effects of equity issuance and outstanding warrants on dilution.