Tuhura Biosciences, Inc. quarterly report, Q2 FY2016

Business context and reporting period

Issuer discrepancy: The request identifies Tuhura Biosciences, Inc., but the supplied Form 10-Q is for DelMar Pharmaceuticals, Inc. Investors should verify the filing and issuer before relying on this summary.

This is DelMar’s unaudited Form 10-Q for the quarter and six months ended December 31, 2015 (its fiscal second quarter of 2016). DelMar is a clinical-stage cancer drug developer focused on VAL-083, including clinical development for glioblastoma (GBM); it also holds certain commercial rights in China, where VAL-083 is approved for lung cancer and chronic myelogenous leukemia. The company reported no product revenue.

Financial performance and position

• Six-month operating cash outflow was $2,635,300, versus $2,065,360 in the restated prior-year period. Investing cash outflow was $16,762; financing cash inflow was $2,854,638. Cash increased $202,576 to $1,957,009.
• At December 31, cash was $1,957,009; working capital was $1,605,025; total assets were $2,184,593; and total stockholders’ equity was $116,729. Current liabilities were $535,835, plus a $1,352,584 derivative liability and $179,445 stock-option liability. No conventional borrowings are reported on the balance sheet.
• Margins are not meaningful because the company reported no revenue. The filing gives no clear cash-runway estimate.

Material changes versus prior comparable periods

• Six-month net loss rose to $4,268,078 from $2,136,369 (restated). Operating expenses increased: R&D by 9% and G&A by 24%.
• Derivative-warrant remeasurement shifted from a $329,357 gain in the prior-year six-month period to a $1,219,634 loss in the current period. Warrant-term changes added a further $263,965 loss. These non-cash fair-value items materially affected reported results and are sensitive to share-price and valuation assumptions.
• Cash used in operations increased by $569,940 year over year. Financing proceeds supported a modest increase in cash despite the operating burn.
• The company restated prior financial statements after determining that certain 2013 placement-agent warrants had been incorrectly classified as equity rather than derivative liabilities. The company said the errors were material.

Outlook, commentary, risks and unusual items

• Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern. It had an accumulated deficit of $22,885,550, ongoing losses, no near-term product revenue, and stated that additional funding is required. Planned funding sources include equity issuance and strategic partnerships; success is not assured.
• Clinical outlook: DelMar reported completion of enrollment in a 14-patient Phase II expansion cohort for refractory GBM and selected 40 mg/m² as the maximum tolerated dose. Preliminary survival observations were described as encouraging, but were interim and based on small patient groups. Management anticipated further data in 2016 and discussed possible registration-directed Phase II/III trials, subject to FDA discussions and funding.
• Other planned studies included GBM trials with MD Anderson and studies in China with Guangxi Wuzhou Pharmaceuticals. Timing and execution depend on funding, regulatory input, collaborators, and clinical results. VAL-083 is not approved outside China.
• Financing and dilution: The filing reports a 2015 public offering of 4,277,667 common shares and warrants. It cites $1,903,514 net cash proceeds in the offering note, while other MD&A passages cite $2,453,633 as offering proceeds. The difference is not clearly reconciled in the supplied text. At December 31, 2015, 44,309,098 common shares were reported on an as-exchanged basis, with 17,888,945 warrants and 3,635,000 options outstanding.
• Controls: Management said it completed remediation of a material weakness related to complex financial-instrument accounting during the quarter and concluded disclosure controls were effective at period end.
• There were no legal proceedings reported. The filing notes that protection of intellectual property in China may be weaker than in the United States.

Most important facts for investors to verify

1. Confirm whether the intended filing is DelMar Pharmaceuticals’ 10-Q; the request names Tuhura Biosciences.
2. Reconcile the stated public-offering proceeds of $1,903,514 versus $2,453,633 and assess the actual net cash raised.
3. Assess financing needs and cash runway in light of $1.96 million cash and $2.64 million six-month operating cash use.
4. Review the warrant restatement, derivative-liability valuation assumptions, and the resulting earnings volatility.
5. Check subsequent clinical data, FDA feedback, trial start dates, collaborator commitments, and the funding available to execute those plans.
6. Distinguish issued common shares from exchangeable shares and potential dilution from outstanding warrants and options.