Moleculin Biotech, Inc. annual report, FY2021

Moleculin Biotech, Inc. — 2021 Form 10-K

Reporting period: Fiscal year ended December 31, 2021; filed March 24, 2022. Moleculin is a clinical-stage pharmaceutical company developing drug candidates for cancers and viruses. It reported no product revenue and had no approved products. Financial amounts below are in U.S. dollars.

Financial performance and liquidity

Metric	2021	2020
Revenue	$0	$0
Research and development expense	$14.4 million	$12.8 million
General and administrative expense	$8.4 million	$6.8 million
Total operating expenses / operating loss	$23.0 million	$19.7 million
Net loss	$15.9 million	$17.4 million
Net loss per share, basic and diluted	$0.59	$1.76
Cash used in operating activities	$19.0 million	$17.8 million

2021 net loss included a $6.7 million noncash gain from revaluing warrant liabilities, versus a $2.3 million gain in 2020. The lower reported net loss therefore did not reflect improved operating performance: operating expenses and operating loss increased.
Cash and cash equivalents were $70.9 million at year-end, compared with $15.2 million a year earlier. Current assets were $72.5 million and current liabilities $3.6 million. Management said year-end cash, together with additional funding received after year-end, was expected to fund projected operations into 2024; the filing does not quantify that subsequent funding in this discussion.
Financing activities provided $74.7 million in 2021, primarily net proceeds from common-stock issuance. The February 2021 public offering raised approximately $78.0 million gross. Operating cash use increased with clinical activity and drug manufacturing.
Total liabilities were $5.1 million, including $1.4 million of warrant liability, $3.6 million of current liabilities and lease obligations. The filing reports no conventional borrowings. The company had an $11.1 million in-process research and development intangible asset, subject to impairment risk.
There is no meaningful sales margin to report because the company had no revenue. Stock-based compensation was $2.4 million, up from $1.7 million. Accumulated deficit was $72.8 million.

Material developments and pipeline

R&D expense rose $1.6 million year over year, attributed mainly to more internally funded clinical trials and clinical activity, plus manufacturing additional drug product. G&A rose $1.6 million, mainly from headcount, consulting and advisory fees, and insurance.
Annamycin: The European single-agent relapsed/refractory AML Phase 1 trial concluded in February 2022 and established a recommended Phase 2 dose of 240 mg/m². Among five subjects receiving a full course in the final cohort, the company reported a preliminary 60% objective response rate: two partial responses and one complete response with incomplete recovery. The U.S. AML Phase 1 trial reported one morphological leukemia-free state among seven subjects at a dose the company characterized as subtherapeutic.
The company reported no observed cardiotoxicity in its Annamycin trials, including an independent review of preliminary data from 30 subjects; 19 had been treated above the FDA lifetime maximum anthracycline dose. These are early clinical observations, not proof of safety or efficacy in larger studies.
The U.S. Phase 1b/2 Annamycin trial for soft-tissue sarcoma lung metastases was recruiting at 390 mg/m². A dose-limiting febrile neutropenia event led to expansion of that cohort. Preliminary cohort results included stable disease and one partial response in an earlier cohort; data were incomplete.
The company planned a European Phase 1/2 trial of Annamycin plus cytarabine for AML, subject to regulatory approval, and an investigator-led Annamycin sarcoma trial using a different dosing schedule.
WP1066: The externally funded adult brain-tumor trial at MD Anderson was terminated after its principal investigator left. A pediatric brain-tumor trial continued; one DIPG patient had a temporary clinical response, an observation from a single patient. The company expected another investigator-led adult trial, potentially combining WP1066 with radiation.
WP1220: A completed five-subject proof-of-concept trial in cutaneous T-cell lymphoma reported partial responses in three subjects and stable disease in two. The company was seeking collaborators for further study.
WP1122: The UK authorized a Phase 1a study in healthy volunteers for COVID-19, but a protocol amendment concerning formulation dilution remained subject to approval at filing. The FDA had also cleared an IND for a potential GBM study; the company intended to seek an externally funded investigator-led trial.

Outlook, risks and unusual items

Management anticipated continued operating losses and negative operating cash flow for the next several years. The company said further capital may be required; financing may be unavailable or dilutive, and clinical plans could be curtailed if funding is insufficient.
Key risks include clinical-trial failure or delay, enrollment constraints, regulatory uncertainty, reliance on third-party manufacturers and physician-sponsored studies, and dependence on MD Anderson licenses. COVID-19 had slowed recruitment and affected drug supply and site monitoring; the filing also noted uncertainty from the Russia-Ukraine conflict and potential disruption to regional trials, vendors and supply chains.
Annamycin’s composition-of-matter patent has expired; the company is pursuing formulation, process and use patents. Its $11.1 million IPR&D asset could be impaired if development is abandoned.
The company has no sales or manufacturing infrastructure and relies on contract manufacturers. Commercialization, reimbursement, competition and the ability to secure partners remain uncertain.
Related-party matters warrant attention: WPD is affiliated with cofounder Waldemar Priebe, and the December 2021 WPD amendment was not supported by a fairness opinion. The filing also describes other historical related-party arrangements and related-party consulting and laboratory expenses.
In February 2021, the company completed a one-for-six reverse stock split. Its February 2021 public offering materially increased shares outstanding; year-end common shares were 28.6 million. It also reported 4.6 million options and warrants outstanding in aggregate in its risk disclosures, creating potential dilution.
The independent auditor issued an unqualified opinion on the financial statements and reported no critical audit matters. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2021; the auditor did not provide an internal-control attestation.

Important facts for investors to verify

Actual cash balance and cash runway after subsequent-period spending and financing, and whether management’s projection into 2024 remains achievable.
Final, audited clinical results and safety data for Annamycin, including the AML response results, the sarcoma dose-escalation outcome and cardiotoxicity monitoring.
Regulatory approvals, trial start dates, recruitment progress and funding sources for planned AnnAraC, WP1122 and WP1066 studies.
Potential dilution from outstanding options, warrants and equity financing facilities, and the terms and use of any post-year-end financing.
WPD’s development commitments, the related-party terms and any assignment or termination developments; also monitor MD Anderson license milestones and the IPR&D impairment assessment.