Aptose Biosciences Inc. (NASDAQ:APTO) Q1 2023 Earnings Conference Call May 8, 2023 5:00 PM ET Company Participants Susan Pietropaolo – Corporate Communications & Investor Relations William G. Rice – Chairman, President and Chief Executive Officer Rafael Bejar – Senior Vice President and Chief Medical Officer Fletcher Payne – Senior Vice President and Chief Financial Officer Conference Call Participants Edward Tenthoff – Piper Sandler & Co. Li Watsek – Cantor Fitzgerald Joseph Pantginis – H.C. Wainwright Ope ...

[PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents Aptose Biosciences Inc.'s unaudited interim financial statements and management's discussion for Q1 2023 [Item 1 – Financial Statements](index=5&type=section&id=Item%201%20%E2%80%93%20Financial%20Statements) Presents Aptose Biosciences Inc.'s unaudited condensed consolidated interim financial statements and related notes for Q1 2023 and 2022 [Condensed Consolidated Interim Statements of Financial Position](index=6&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Financial%20Position) Summarizes Aptose Biosciences Inc.'s financial position, including assets, liabilities, and equity, as of March 31, 2023, and December 31, 2022 **Condensed Consolidated Interim Statements of Financial Position (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :---------------------------- | :------------- | :---------------- | | Total Assets | $39,330 | $51,027 | | Cash and Cash Equivalents | $22,762 | $36,970 | | Investments | $12,958 | $9,989 | | Total Current Assets | $37,929 | $49,519 | | Total Liabilities | $13,337 | $13,286 | | Total Shareholders' Equity | $25,993 | $37,741 | | Deficit | $(478,006) | $(464,330) | [Condensed Consolidated Interim Statements of Loss and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) Details Aptose Biosciences Inc.'s revenue, expenses, net loss, and loss per share for the three months ended March 31, 2023 and 2022 **Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (in thousands of US dollars, except per share data)** | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $— | $— | | Research and Development Expenses | $8,811 | $7,393 | | General and Administrative Expenses | $5,285 | $4,107 | | Operating Expenses | $14,096 | $11,500 | | Interest Income | $422 | $22 | | Net Loss | $(13,676) | $(11,481) | | Basic and Diluted Loss Per Common Share | $(0.15) | $(0.12) | [Condensed Consolidated Interim Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Outlines changes in Aptose Biosciences Inc.'s shareholders' equity, including net loss and share issuances, for Q1 2023 **Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (in thousands of US dollars)** | Metric | Balance, December 31, 2022 | Balance, March 31, 2023 | | :------------------------- | :------------------------- | :---------------------- | | Total Shareholders' Equity | $37,741 | $25,993 | | Net Loss | $(13,676) | $(13,676) | | Common Shares Issued (2022 ATM Facility) | $34 | $34 | | Common Shares Issued (ESPP plan) | $16 | $16 | | Stock-based Compensation | $1,874 | $1,874 | [Condensed Consolidated Interim Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Cash%20Flows) Presents Aptose Biosciences Inc.'s cash flows from operating, investing, and financing activities for Q1 2023 and 2022 **Condensed Consolidated Interim Statements of Cash Flows (in thousands of US dollars)** | Cash Flow Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(11,302) | $(9,645) | | Net cash from/(used in) investing activities | $(2,960) | $7,505 | | Net cash from financing activities | $50 | $15 | | Net decrease in cash and cash equivalents | $(14,208) | $(2,123) | | Cash and cash equivalents, end of period | $22,762 | $36,991 | [1. Reporting entity](index=10&type=section&id=1.%20Reporting%20entity) Provides an overview of Aptose Biosciences Inc.'s business, product pipeline, and going concern status - Aptose is a science-driven clinical-stage biotechnology company focused on developing precision medicines for oncology, with an initial focus on hematology[34](index=34&type=chunk) - The company has two clinical-stage investigational products for hematological malignancies: tuspetinib (myeloid kinase inhibitor) and luxeptinib (dual lymphoid and myeloid kinase inhibitor)[35](index=35&type=chunk) - Aptose has an accumulated deficit of approximately **$478.0 million** as of March 31, 2023, and faces substantial doubt about its ability to continue as a going concern, requiring additional financing[36](index=36&type=chunk)[39](index=39&type=chunk) [2. Significant accounting policies](index=11&type=section&id=2.%20Significant%20accounting%20policies) Details Aptose Biosciences Inc.'s critical accounting policies, going concern considerations, and financial risk management - Substantial doubt exists about the Company's ability to continue as a going concern due to an accumulated deficit of **$478.0 million**, cash and cash equivalents and investment balances of **$35.7 million**, and working capital of **$25.5 million** as of March 31, 2023[39](index=39&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - The company is evaluating strategies for additional funding, including equity or debt financing, but there is no assurance of obtaining such liquidity when needed or under acceptable terms, if at all[44](index=44&type=chunk) - No changes to significant accounting policies were made during the three months ended March 31, 2023, and the functional and presentation currency of the Company is the US dollar[45](index=45&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - Credit risk from cash and investments is managed by investing in highly rated corporations and treasury bills capable of prompt liquidation[49](index=49&type=chunk) [3. Cash and cash equivalents](index=12&type=section&id=3.%20Cash%20and%20cash%20equivalents) Provides a breakdown of Aptose Biosciences Inc.'s cash and cash equivalents as of March 31, 2023, and December 31, 2022 **Cash and Cash Equivalents (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------------------------ | :------------- | :---------------- | | Cash | $1,132 | $596 | | Deposits (high interest savings, money market, term deposits < 90 days) | $21,630 | $36,374 | | Total Cash and Cash Equivalents | $22,762 | $36,970 | [4. Prepaid expenses](index=12&type=section&id=4.%20Prepaid%20expenses) Details Aptose Biosciences Inc.'s prepaid expenses, including R&D and insurance, as of March 31, 2023, and December 31, 2022 **Prepaid Expenses (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :---------------------------- | :------------- | :---------------- | | Prepaid Research and Development Expenses | $1,208 | $1,271 | | Prepaid Insurance | $684 | $893 | | Other Prepaid Expenses | $155 | $139 | | Total Prepaid Expenses | $2,047 | $2,303 | [5. Right-of-use assets](index=12&type=section&id=5.%20Right-of-use%20assets) Presents Aptose Biosciences Inc.'s right-of-use assets and accumulated amortization as of March 31, 2023, and December 31, 2022 **Right-of-Use Assets (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Right-of-use assets, NBV | $1,218 | $1,297 | | Accumulated Amortization | $(1,906) | $(1,803) | [6. Investments](index=12&type=section&id=6.%20Investments) Summarizes Aptose Biosciences Inc.'s investment portfolio, including Treasury Bills and Commercial Notes, as of March 31, 2023 **Investments (Market Value in thousands of US dollars)** | Investment Type | March 31, 2023 | December 31, 2022 | | :-------------- | :------------- | :---------------- | | United States Treasury Bills | $9,985 | $9,989 | | Commercial Notes | $2,973 | $0 | | Total Investments | $12,958 | $9,989 | [7. Fair value measurements and financial instruments](index=12&type=section&id=7.%20Fair%20value%20measurements%20and%20financial%20instruments) Discusses Aptose Biosciences Inc.'s fair value measurements for financial assets, primarily classified as Level 2 inputs - All financial assets measured at fair value are classified as Level 2 inputs, indicating valuation based on observable market data other than quoted prices[59](index=59&type=chunk)[60](index=60&type=chunk) **Fair Value of Assets (in thousands of US dollars)** | Asset Type | March 31, 2023 | December 31, 2022 | | :----------------------------------------- | :------------- | :---------------- | | Money Market funds | $14,126 | $22,343 | | High interest savings account | $1,537 | $13,866 | | United States Treasury Bills (cash equivalents) | $5,967 | $0 | | United States Treasury Bills (short-term investments) | $9,985 | $9,989 | | Commercial Note | $2,973 | $0 | | Total Fair Value Assets | $34,588 | $46,363 | [8. Accrued liabilities](index=13&type=section&id=8.%20Accrued%20liabilities) Details Aptose Biosciences Inc.'s accrued liabilities, including personnel and R&D costs, as of March 31, 2023, and December 31, 2022 **Accrued Liabilities (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Accrued Personnel Related Costs | $1,180 | $2,302 | | Accrued Research and Development Expenses | $5,005 | $3,122 | | Other Accrued Expenses | $409 | $233 | | Total Accrued Liabilities | $6,594 | $5,657 | [9. Lease liability](index=13&type=section&id=9.%20Lease%20liability) Outlines Aptose Biosciences Inc.'s lease liabilities and recent lease extensions for its office facilities - Aptose extended its San Diego office lease through May 31, 2026, and its Toronto office lease through June 30, 2024[63](index=63&type=chunk) **Lease Liability (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :------------------------- | :------------- | :---------------- | | Lease liability, current portion | $306 | $301 | | Lease liability, long-term portion | $918 | $1,002 | | Total Lease Liability | $1,224 | $1,303 | [10. Share capital](index=14&type=section&id=10.%20Share%20capital) Details Aptose Biosciences Inc.'s equity issuances and loss per share calculations for the periods presented [a. Equity issuances](index=14&type=section&id=a.%20Equity%20issuances) Summarizes Aptose Biosciences Inc.'s common share issuances under ATM facilities during Q1 2023 - Issued **46,427 common shares** under the 2022 ATM Facility for net proceeds of **$34 thousand** during the three months ended March 31, 2023[69](index=69&type=chunk) - The 2020 ATM Facility was terminated on October 31, 2022, having raised a cumulative total of **$86 thousand** net proceeds[70](index=70&type=chunk) [b. Loss per share](index=15&type=section&id=b.%20Loss%20per%20share) Presents Aptose Biosciences Inc.'s net loss and weighted-average common shares for loss per share calculation **Loss Per Share (in thousands of US dollars, except per share data)** | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net Loss | $(13,676) | $(11,481) | | Weighted-average common shares (basic and diluted) | 92,562 | 92,226 | | Net Loss per share (basic and diluted) | $(0.15) | $(0.12) | [11. Stock‑based compensation](index=15&type=section&id=11.%20Stock%E2%80%91based%20compensation) Details Aptose Biosciences Inc.'s stock option plan, employee stock purchase plan, and share-based payment expenses [a. Stock option plan and employee stock purchase plan](index=15&type=section&id=a.%20Stock%20option%20plan%20and%20employee%20stock%20purchase%20plan) Provides an overview of Aptose Biosciences Inc.'s outstanding stock options, grants, and restricted stock units - As of March 31, 2023, **18.84 million stock options** were outstanding (weighted average exercise price **$3.11**, contractual life **7.01 years**)[80](index=80&type=chunk) - **3.22 million stock options** were granted in Q1 2023 with a weighted-average grant date fair value of **$0.44**[80](index=80&type=chunk)[82](index=82&type=chunk) - **570,000 restricted stock units (RSUs)** were granted, immediately vested, and redeemed for common shares in Q1 2023[85](index=85&type=chunk)[86](index=86&type=chunk) [b. Share-based payment expense](index=17&type=section&id=b.%20Share-based%20payment%20expense) Details Aptose Biosciences Inc.'s share-based payment expenses allocated to R&D and G&A for Q1 2023 and 2022 **Share-based Payment Expense (in thousands of US dollars)** | Expense Category | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Research and Development | $652 | $946 | | General and Administrative | $1,222 | $1,568 | | Total Share-based Payment Expense | $1,874 | $2,514 | [12. Subsequent events](index=17&type=section&id=12.%20Subsequent%20events) Reports on Aptose Biosciences Inc.'s additional share issuances under the 2022 ATM Facility after March 31, 2023 - Subsequent to March 31, 2023, up to May 8, 2023, Aptose issued an additional **648,384 shares** under the 2022 ATM Facility, generating **$319 thousand** in net proceeds[89](index=89&type=chunk) [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Aptose Biosciences Inc.'s business, clinical programs, liquidity, capital resources, and financial results for Q1 2023 [OVERVIEW](index=18&type=section&id=OVERVIEW) Provides a general introduction to Aptose Biosciences Inc.'s clinical-stage biotechnology focus and product pipeline - Aptose is a clinical-stage biotechnology company developing precision medicines for oncology, specifically hematologic cancers[93](index=93&type=chunk) - The company's pipeline includes two clinical-stage investigational products: tuspetinib (myeloid kinase inhibitor) and luxeptinib (dual lymphoid and myeloid kinase inhibitor)[94](index=94&type=chunk)[95](index=95&type=chunk) [PROGRAM UPDATES](index=18&type=section&id=PROGRAM%20UPDATES) Details the progress and clinical activity of Aptose Biosciences Inc.'s investigational products, tuspetinib and luxeptinib [Tuspetinib](index=18&type=section&id=Tuspetinib) Provides updates on the Phase 1/2 clinical trial for tuspetinib in R/R AML, highlighting its activity and designations - Tuspetinib, an oral myeloid kinase inhibitor, is in an international Phase 1/2 clinical trial for relapsed or refractory acute myeloid leukemia (R/R AML)[94](index=94&type=chunk)[96](index=96&type=chunk) - It has demonstrated robust clinical activity, including multiple complete responses in R/R AML patients with diverse disease genotypes (e.g., NPM1, MLL, TP53, RAS pathway mutations), and a favorable safety profile without prolonged myelosuppression or life-threatening toxicities[96](index=96&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - Tuspetinib received FDA Orphan Drug designation for AML (Oct 2018) and Fast Track designation for R/R AML with FLT3 mutation (May 2022)[98](index=98&type=chunk) - The APTIVATE Phase 1/2 expansion trial has initiated monotherapy and doublet combination treatment with venetoclax (TUS/VEN), showing brisk enrollment and early signs of antileukemic activity[100](index=100&type=chunk)[105](index=105&type=chunk) - Preclinical data show tuspetinib inhibits wild type and mutant FLT3, SYK, JAK1, JAK2, and mutant c-KIT, and can overcome acquired resistance to other FLT3 inhibitors[106](index=106&type=chunk)[107](index=107&type=chunk) [Luxeptinib](index=20&type=section&id=Luxeptinib) Details the Phase 1a/b studies for luxeptinib, including its new G3 formulation and clinical activity in various malignancies - Luxeptinib is an oral, dual lymphoid and myeloid kinase inhibitor in Phase 1a/b studies for R/R AML, high-risk MDS, and B-cell malignancies (CLL, SLL, NHL)[108](index=108&type=chunk)[109](index=109&type=chunk) - A 'third generation' (G3) formulation of luxeptinib is being developed, showing up to an **18-fold improvement** in plasma steady-state exposure compared to the original G1 formulation, with continuous dosing initiated in R/R AML patients[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Clinical activity includes a complete response in a diffuse large B-cell lymphoma patient and durable MRD-negative CR and blast reductions in FLT3-ITD mutated AML patients[110](index=110&type=chunk)[113](index=113&type=chunk) - Research indicates luxeptinib interferes with LYN-mediated activation of SYK and modulates BCR signaling, distinct from BTK inhibitors like ibrutinib[117](index=117&type=chunk) [Other corporate matters](index=21&type=section&id=Other%20corporate%20matters) Addresses Aptose Biosciences Inc.'s Nasdaq compliance status and potential strategies for regaining minimum bid price - Aptose received a Nasdaq deficiency letter on July 18, 2022, for not meeting the **$1.00 minimum bid price** requirement, with an extension until July 18, 2023[40](index=40&type=chunk)[41](index=41&type=chunk)[118](index=118&type=chunk) - The company is considering a reverse stock split (1-for-10 to 1-for-20) to regain Nasdaq compliance, pending shareholder and Board approval[42](index=42&type=chunk)[120](index=120&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=22&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Analyzes Aptose Biosciences Inc.'s financial position, funding sources, and cash flow activities, highlighting going concern risks - Aptose is an early-stage development company with no product revenues, dependent on equity financing and strategic partners[122](index=122&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern and requires additional financing, which may be affected by market conditions or trial delays[125](index=125&type=chunk)[131](index=131&type=chunk) **Liquidity and Capital Resources (in thousands of US dollars)** | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Cash and Cash Equivalents | $22,762 | $36,970 | | Investments | $12,958 | $9,989 | | Total Cash, Cash Equivalents & Investments | $35,720 | $46,959 | | Working Capital | $25,510 | $37,235 | [Sources of liquidity](index=22&type=section&id=Sources%20of%20liquidity) Identifies Aptose Biosciences Inc.'s primary funding mechanisms, including equity financing and interest income - Operations are financed primarily through equity financing, exercise of warrants and stock options, and interest income[35](index=35&type=chunk)[126](index=126&type=chunk) - Excess cash is invested in short-term, highly-rated financial instruments to manage credit risk[126](index=126&type=chunk)[136](index=136&type=chunk) [2022 Base Shelf](index=22&type=section&id=2022%20Base%20Shelf) Describes Aptose Biosciences Inc.'s $200 million base shelf prospectus for future equity or debt offerings - A **$200 million** base shelf prospectus was filed in October 2022, effective until October 2025, for distributing common shares, warrants, or units[127](index=127&type=chunk) [At-The-Market Facilities](index=22&type=section&id=At-The-Market%20Facilities) Summarizes Aptose Biosciences Inc.'s share issuances and net proceeds from its At-The-Market facilities - Raised **$34 thousand** net proceeds from the 2022 ATM Facility in Q1 2023 by issuing **46,427 shares**[129](index=129&type=chunk) - The 2020 ATM Facility was terminated on October 31, 2022, after raising a cumulative **$86 thousand** net proceeds[130](index=130&type=chunk) [Cash flows](index=23&type=section&id=Cash%20flows) Provides a detailed breakdown of Aptose Biosciences Inc.'s cash flow activities from operations, investing, and financing **Summary of Cash Flows (in thousands of US dollars)** | Cash Flow Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $(11,302) | $(9,645) | | Net cash provided by (used in) investing activities | $(2,960) | $7,505 | | Net cash provided by (used in) financing activities | $50 | $15 | | Net decrease in cash and cash equivalents | $(14,208) | $(2,123) | [Cash used in operating activities](index=23&type=section&id=Cash%20used%20in%20operating%20activities) Analyzes the increase in cash used for Aptose Biosciences Inc.'s operating activities, driven by higher R&D expenses - Cash used in operating activities increased to **$11.3 million** in Q1 2023 (from **$9.6 million** in Q1 2022) due to higher operating expenses, including clinical studies, manufacturing, and professional fees[134](index=134&type=chunk) - Negative cash flow from operations is expected to continue until regulatory approval and commercialization of products, if ever[135](index=135&type=chunk) [Cash flow from (used in) investing activities](index=23&type=section&id=Cash%20flow%20from%20%28used%20in%29%20investing%20activities) Compares Aptose Biosciences Inc.'s cash flow from investing activities, shifting from net maturities to net acquisitions of investments - Investing activities resulted in **$3.0 million** cash used in Q1 2023 (net acquisition of investments) compared to **$7.5 million** cash provided in Q1 2022 (net maturities of investments)[136](index=136&type=chunk) [Cash flow from financing activities](index=24&type=section&id=Cash%20flow%20from%20financing%20activities) Details Aptose Biosciences Inc.'s cash generated from financing activities, primarily through ATM facilities and ESPP - Cash from financing activities was **$50 thousand** in Q1 2023 (2022 ATM Facility and ESPP) versus **$15 thousand** in Q1 2022 (stock option exercises)[139](index=139&type=chunk) [CONTRACTUAL OBLIGATIONS and commitments described under Item 7](index=24&type=section&id=CONTRACTUAL%20OBLIGATIONS%20and%20commitments%20described%20under%20Item%207) States that there are no material changes to Aptose Biosciences Inc.'s contractual obligations since the last annual report - No material changes to contractual obligations and commitments since the December 31, 2022 Annual Report on Form 10-K[140](index=140&type=chunk) [RESULTS OF OPERATIONS](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes Aptose Biosciences Inc.'s financial performance, focusing on changes in R&D, G&A expenses, and net loss **Summary of Results of Operations (in thousands of US dollars)** | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net Loss | $13,676 | $11,481 | | Research and Development Expenses | $8,811 | $7,393 | | General and Administrative Expenses | $5,285 | $4,107 | | Other Income, net | $420 | $19 | [Research and Development](index=24&type=section&id=Research%20and%20Development) Discusses the increase in Aptose Biosciences Inc.'s R&D expenses, primarily driven by the tuspetinib program - R&D expenses increased by **$1.4 million** to **$8.8 million** in Q1 2023, primarily due to higher tuspetinib program costs[146](index=146&type=chunk) - Tuspetinib program costs increased to **$4.8 million** (from **$1.2 million** in Q1 2022) due to patient enrollment in the APTIVATE clinical trial[146](index=146&type=chunk) - Luxeptinib program costs decreased by **$1.5 million** due to lower manufacturing costs from a new formulation requiring less API, partially offset by higher clinical trial contractor costs[146](index=146&type=chunk) - Personnel-related expenses decreased by **$256 thousand**, and stock-based compensation decreased by **$294 thousand**[146](index=146&type=chunk) - R&D expenses are expected to be higher in the foreseeable future as tuspetinib advances into larger clinical trials[142](index=142&type=chunk) [General and Administrative](index=25&type=section&id=General%20and%20Administrative) Examines the increase in Aptose Biosciences Inc.'s G&A expenses, mainly due to higher salaries and professional fees - G&A expenses increased by **$1.2 million** to **$5.3 million** in Q1 2023, primarily due to higher salaries and professional fees[148](index=148&type=chunk) - Stock-based compensation within G&A decreased by **$346 thousand** due to lower grant date fair values[150](index=150&type=chunk) - G&A expenses are expected to increase in the foreseeable future to support pipeline expansion and intellectual property[147](index=147&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=26&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Reviews Aptose Biosciences Inc.'s critical accounting policies, estimates, and updated share information [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Confirms no material changes to Aptose Biosciences Inc.'s critical accounting policies and estimates in Q1 2023 - No material changes to critical accounting policies and estimates occurred during the three months ended March 31, 2023[152](index=152&type=chunk) [Significant accounting judgments and estimates](index=26&type=section&id=Significant%20accounting%20judgments%20and%20estimates) Highlights management's judgments and estimates for R&D expenses and their potential impact on financial statements - Management makes significant judgments and estimates for R&D expenses based on contract progress, impacting accrued and prepaid balances[153](index=153&type=chunk) - A **10% variance** in R&D expense estimates could result in an over or understatement of approximately **$620 thousand** in R&D expenses[154](index=154&type=chunk) [Updated share information](index=26&type=section&id=Updated%20share%20information) Provides Aptose Biosciences Inc.'s common shares issued and outstanding, and shares issuable from stock options as of May 8, 2023 **Updated Share Information (as of May 8, 2023)** | Metric | Amount | | :----------------------------------- | :------------- | | Common Shares Issued and Outstanding | 93,653,652 | | Common Shares Issuable from Stock Options | 18,790,758 | [Item 3 – Qualitative and Quantitative Disclosures about Market Risk](index=27&type=section&id=Item%203%20%E2%80%93%20Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) Aptose Biosciences Inc., as a smaller reporting company, is exempt from market risk disclosures - As a smaller reporting company, Aptose is exempt from providing qualitative and quantitative disclosures about market risk[158](index=158&type=chunk) [Item 4 – Controls and Procedures](index=27&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management concluded Aptose Biosciences Inc.'s disclosure controls and procedures were effective as of March 31, 2023 - As of March 31, 2023, disclosure controls and procedures were deemed effective by management, including the CEO and CFO[159](index=159&type=chunk) - Control systems provide reasonable, not absolute, assurance and may not prevent all errors or fraud[160](index=160&type=chunk) [CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING](index=27&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) Confirms no material changes in Aptose Biosciences Inc.'s internal control over financial reporting during Q1 2023 - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2023[161](index=161&type=chunk) [PART II—OTHER INFORMATION](index=28&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, exhibits, and signatures for the report [Item 1 – Legal Proceedings](index=28&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) Aptose Biosciences Inc. is not currently involved in any material active legal actions - The company is not involved in any material active legal actions[163](index=163&type=chunk) [Item 1A – Risk Factors](index=28&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) No material changes to Aptose Biosciences Inc.'s risk factors since the December 31, 2022 Annual Report on Form 10-K - No material changes to risk factors since the December 31, 2022 Annual Report on Form 10-K[164](index=164&type=chunk) [Item 6 – Exhibits](index=29&type=section&id=Item%206%20%E2%80%93%20Exhibits) Lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL financial statements - Includes certifications from Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[166](index=166&type=chunk) - Contains Inline XBRL formatted financial statements and related taxonomy documents (Exhibit 101 and 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[166](index=166&type=chunk) [Signatures](index=30&type=section&id=Signatures) The report was signed by Aptose Biosciences Inc.'s President and CEO on May 8, 2023 - Report signed by William G. Rice, Ph.D., President and CEO, on May 8, 2023[168](index=168&type=chunk)

Financial Data and Key Metrics Changes - The company ended 2022 with approximately $47 million in cash, cash equivalents, and investments, a decrease of $4.8 million compared to the previous quarter [31] - The net loss for the fourth quarter was approximately $10 million, translating to a loss of approximately negative $0.11 per share, down from a loss of $24.3 million in the comparable period in 2021 [31] - Research and development expenses were $6.8 million for the quarter, down from $20.2 million in the same quarter of 2021, and for the full year, R&D expenses were $28.1 million compared to $46 million in the previous year [32] Business Line Data and Key Metrics Changes - The company made significant strides in the development of Tuspetinib for the treatment of acute myeloid leukemia (AML), demonstrating a highly differentiated profile with complete remissions in difficult-to-treat patients [7][10] - The new formulation of Luxceptinib (G3) achieved up to 18-fold greater absorption than the original formulation, with continuous dosing showing promising results [16] Market Data and Key Metrics Changes - The treatment paradigm for AML is shifting towards doublet and triplet therapies, with Tuspetinib positioned as a potential drug of choice due to its safety profile and efficacy [19][20] - The company is focusing on specific patient populations, including those with TP53 mutations and FLT3 mutations, to enhance the clinical development of Tuspetinib [24][27] Company Strategy and Development Direction - The company aims to position Tuspetinib as a preferred agent for combination therapy and in earlier lines of treatment, with plans for accelerated approval pathways [27][78] - The strategic focus includes expanding the clinical trials for Tuspetinib in combination with Venetoclax and exploring triplet combinations for frontline patients [12][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging biotech market but emphasized the steady progress made in 2022, including extending the cash runway to the end of Q1 2024 [6] - The management expressed optimism about the potential of Tuspetinib and its role in addressing significant unmet medical needs in AML [19][27] Other Important Information - The company has engaged in productive discussions with several big pharma and biotech companies regarding potential partnerships for Tuspetinib [19] - The ACTIVATE trial for Tuspetinib has begun, with plans to report data at major medical meetings throughout 2023 [25][29] Q&A Session Summary Question: Is it too soon to guide on patient numbers for the ACTIVATE trial update? - Management indicated that enrollment has been brisk for the monotherapy arm, and they expect to provide more clarity on patient numbers later in the year [38][40] Question: Can you provide more details on the different dose cohort sizes being enrolled? - The company has completed the dose escalation and exploration trial, with 60 patients treated, and the starting dose for the ACTIVATE trial is 120 milligrams for monotherapy [44] Question: What are the expectations for the regulatory plan for the monotherapy arm in ACTIVATE? - Management stated that they will align with the FDA on parameters for accelerated approval, with a focus on specific patient populations [50][78] Question: How does the company plan to present data from the ACTIVATE trial? - The company plans to provide updates at major medical meetings, with a more comprehensive data package expected later in the year [46][47] Question: What are the expectations for the activity seen in the monotherapy arm of ACTIVATE? - Early signs of anti-leukemic activity have been observed, but it is still early in the trial [66][69] Question: How is the company approaching the potential for accelerated approval based on specific mutations? - The company aims to enrich for specific populations with high unmet needs, such as those with TP53 mutations and FLT3 mutations, to support regulatory discussions [77][78]

Part I [Business](index=3&type=section&id=ITEM%201.%20BUSINESS) Aptose Biosciences is a clinical-stage biotech developing precision oncology medicines for hematologic malignancies, with lead assets tuspetinib and luxeptinib in Phase 1/2 trials - Aptose is a clinical-stage biotechnology company focused on precision oncology medicines for hematology, with assets designed for single-agent and combination efficacy without overlapping toxicities[14](index=14&type=chunk) - The company's strategy focuses on advancing oral targeted agents for life-threatening cancers, primarily tuspetinib and luxeptinib[15](index=15&type=chunk) - The clinical program for APTO-253, a MYC oncogene inhibitor, was discontinued on December 20, 2021, to prioritize advanced pipeline candidates[20](index=20&type=chunk)[39](index=39&type=chunk) Product Candidate Pipeline | Product Candidate | Target Indication | Stage of Development | | :--- | :--- | :--- | | **Tuspetinib** | Relapsed/Refractory Acute Myeloid Leukemia (R/R AML) | Phase 1/2 | | **Luxeptinib** | R/R B-Cell Malignancies & R/R AML/High-Risk MDS | Phase 1a/b | | **APTO-253** | R/R Blood Cancers (AML/MDS) | Program Discontinued | [Tuspetinib Program](index=5&type=section&id=Tuspetinib%20Program) Tuspetinib, an oral myeloid kinase inhibitor, has shown complete responses in R/R AML Phase 1/2 trials and advanced to the APTIVATE expansion study - Aptose acquired exclusive worldwide rights for tuspetinib from Hanmi Pharmaceutical for an upfront payment of **$12.5 million** ($5 million cash, $7.5 million shares) and up to **$407.5 million** in future milestones plus royalties[23](index=23&type=chunk) - In its Phase 1/2 trial for R/R AML, tuspetinib demonstrated **complete responses (CRs)** at multiple dose levels (40mg, 80mg, 120mg, 160mg) with a favorable safety profile, showing no QTc prolongations, liver/kidney toxicities, or differentiation syndrome[16](index=16&type=chunk)[28](index=28&type=chunk) - The program advanced to the APTIVATE expansion trial, with **120 mg** selected for monotherapy and **80 mg** for combination therapy with venetoclax[28](index=28&type=chunk) [Luxeptinib Program](index=7&type=section&id=Luxeptinib%20Program) Luxeptinib, a dual kinase inhibitor, is in Phase 1a/b trials for B-cell malignancies and AML, with a new G3 formulation showing improved bioavailability - Aptose holds worldwide rights (excluding Korea) to luxeptinib, licensed from Crystal Genomics, with a total deal value of up to **$125 million** for China rights, plus milestones and royalties[31](index=31&type=chunk) - A new G3 formulation was developed to address limited absorption, with a **50 mg** G3 dose predicted to provide exposure comparable to a **900 mg** G1 dose in R/R AML patients[19](index=19&type=chunk)[36](index=36&type=chunk) - The original G1 formulation yielded a **complete response (CR)** in a DLBCL patient at a **900mg BID** dose and a **CR** in an R/R AML patient at a **450mg BID** dose[19](index=19&type=chunk)[36](index=36&type=chunk) [Competitive Conditions](index=9&type=section&id=Competitive%20Conditions) The company faces intense competition in AML and B-cell malignancies from established pharmaceutical companies with approved and developing therapies - In the AML market, Aptose competes with approved therapies from companies including Jazz (VYXEOS), Pfizer (MYLOTARG), Novartis (RYDAPT), Astellas (XOSPATA), and AbbVie (VENCLEXTA)[42](index=42&type=chunk) - For B-cell malignancies, competitors include companies with approved BTK inhibitors like AbbVie (IMBRUVICA) and AstraZeneca (CALQUENCE), and those developing inhibitors for mutant BTK forms, such as Merck and Eli Lilly[43](index=43&type=chunk) [Intellectual Property](index=10&type=section&id=Intellectual%20Property) Aptose holds intellectual property for tuspetinib (39 patents, protection until 2038-2039) and luxeptinib (46 patents, protection until 2033-2038) via licensing - Aptose holds exclusive worldwide rights to tuspetinib, with **39 issued patents** providing protection until **2038-2039**[48](index=48&type=chunk) - The company holds rights to **46 issued patents** for luxeptinib, expected to provide protection until **2033-2038**[51](index=51&type=chunk) [Risk Factors](index=19&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks including going concern doubt, early-stage product development, reliance on third parties, regulatory uncertainties, intense competition, and Nasdaq delisting concerns - There is substantial doubt about the company's ability to continue as a going concern, requiring additional financing to fund operations over the next twelve months[94](index=94&type=chunk) - The company has a history of operating losses, reporting a net loss of **$41.8 million** for FY 2022 and an accumulated deficit of **$464.3 million** as of December 31, 2022[104](index=104&type=chunk) - On July 18, 2022, the company received a Nasdaq notice for its stock price falling below the **$1.00** minimum, with a **180-day** extension until July 18, 2023, to regain compliance[203](index=203&type=chunk)[204](index=204&type=chunk) - The company believes it is classified as a Passive Foreign Investment Company (PFIC), potentially leading to adverse U.S. federal income tax consequences for its U.S. shareholders[212](index=212&type=chunk) - Aptose relies heavily on contract manufacturing organizations (CMOs) for product manufacturing and contract research organizations (CROs) for clinical development, creating dependence on third parties[132](index=132&type=chunk)[143](index=143&type=chunk) [Properties](index=40&type=section&id=ITEM%202.%20PROPERTIES) Aptose leases office spaces in San Diego (7,556 sq. ft.) and Toronto (2,078 sq. ft.), with a San Diego lab lease expiring in February 2023 - The company leases office space in San Diego, CA (**7,556 sq. ft.**) and Toronto, Canada (**2,078 sq. ft.**)[221](index=221&type=chunk) [Legal Proceedings](index=40&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company reports no material pending legal proceedings as of the report date - As of the report date, the company is not aware of any material pending legal proceedings[222](index=222&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common shares trade on Nasdaq (APTO) and TSX (APS), with no anticipated cash dividends or Q4 2022 equity repurchases - Common shares are traded on Nasdaq (**APTO**) and the Toronto Stock Exchange (**APS**)[224](index=224&type=chunk) - The company does not expect to pay cash dividends in the foreseeable future[224](index=224&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=42&type=section&id=ITEM%207%20-%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) MD&A details a reduced net loss in 2022 due to lower R&D, but weakened liquidity and going concern doubt persist, while tuspetinib and luxeptinib programs advanced [Program Updates](index=42&type=section&id=PROGRAM%20UPDATES) In 2022, tuspetinib completed dose escalation and initiated the APTIVATE trial, while luxeptinib advanced with a new, more bioavailable G3 formulation - Tuspetinib completed dose escalation and exploration, delivering single-agent responses in heavily pretreated R/R AML patients, and initiated the APTIVATE expansion trial for monotherapy (**120mg**) and combination (**80mg**) with venetoclax[236](index=236&type=chunk) - For luxeptinib, a new G3 formulation was developed, with a **50mg** G3 dose predicted to achieve plasma exposure comparable to **900mg** of the original G1 formulation, with AML patient dosing beginning in November 2022[240](index=240&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity significantly declined in 2022, with cash and investments at **$47.0 million**, raising substantial doubt about its going concern status and necessitating additional financing - Management states that additional financing is necessary to continue operations, raising substantial doubt about the company's ability to continue as a going concern[255](index=255&type=chunk) Liquidity Position (in thousands) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,970 | $39,114 | | Investments | $9,989 | $40,014 | | **Total Cash & Investments** | **$46,959** | **$79,128** | | Working capital | $37,235 | $73,563 | Cash Flow Summary (in thousands) | Activity | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in Operating activities | $(32,322) | $(43,304) | | Net cash from (used in) Investing activities | $30,066 | $(35,208) | | Net cash from Financing activities | $116 | $226 | [Results of Operations](index=50&type=section&id=RESULTS%20OF%20OPERATIONS) Aptose reported a reduced net loss of **$41.8 million** in 2022, down from **$65.4 million** in 2021, primarily due to lower R&D and G&A expenses Consolidated Results of Operations (in thousands, except per share data) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Research and development expenses | $28,088 | $45,985 | | General and administrative expenses | $14,514 | $19,462 | | **Net loss** | **$(41,823)** | **$(65,354)** | | **Basic and diluted loss per Common Share** | **$(0.45)** | **$(0.73)** | Research & Development Expense Breakdown (in thousands) | Expense Category | 2022 | 2021 | | :--- | :--- | :--- | | License fee – Tuspetinib | $— | $12,500 | | Program costs – Tuspetinib | $10,083 | $57 | | Program costs – Luxeptinib | $8,426 | $18,490 | | Program costs – APTO-253 | $141 | $3,543 | | Personnel & Stock-based comp. | $9,399 | $11,383 | | **Total R&D Expenses** | **$28,088** | **$45,985** | - The **$17.9 million** decrease in R&D expenses from 2021 to 2022 was primarily due to the **$12.5 million** tuspetinib license fee in 2021, a **$10.1 million** decrease in luxeptinib program costs, and a **$3.4 million** decrease in APTO-253 costs, partially offset by a **$10.0 million** increase in tuspetinib program costs[279](index=279&type=chunk) [Controls and Procedures](index=54&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes in Q4 2022 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[299](index=299&type=chunk) - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of December 31, 2022[303](index=303&type=chunk) Part III [Directors, Compensation, Ownership, and Fees](index=56&type=section&id=ITEM%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14, covering directors, compensation, ownership, and fees, is incorporated by reference from the 2023 Proxy Statement - The information required for Items 10 through 14 is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Shareholders[306](index=306&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=57&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section includes consolidated financial statements for 2022 and 2021, and KPMG LLP's auditor report, which highlights a "Going Concern" uncertainty - The Report of Independent Registered Public Accounting Firm (KPMG LLP) includes a "Going Concern" paragraph, citing recurring losses that raise substantial doubt about the company's ability to continue as a going concern[330](index=330&type=chunk) - The auditor's report identifies "Research and Development Prepaid and Accrued Costs" as a Critical Audit Matter due to subjective and complex estimation judgments[336](index=336&type=chunk)[337](index=337&type=chunk) Consolidated Statements of Financial Position (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | **$49,519** | **$81,737** | | **Total assets** | **$51,027** | **$82,525** | | **Total current liabilities** | **$12,284** | **$8,174** | | **Total liabilities** | **$13,286** | **$8,289** | | **Total shareholders' equity** | **$37,741** | **$74,236** | Consolidated Statements of Loss and Comprehensive Loss (in thousands) | | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Research and development | $28,088 | $45,985 | | General and administrative | $14,514 | $19,462 | | **Net loss** | **$(41,823)** | **$(65,354)** |

Aptose Biosciences Inc. (NASDAQ:APTO) Q3 2022 Results Conference Call November 1, 2022 5:00 PM ET Company Participants Susan Pietropaolo - Managing Director William Rice - Chairman, President and CEO Fletcher Payne - SVP and Chief Financial Officer Rafael Bejar - SVP and Chief Medical Officer Conference Call Participants Li Watsek - Cantor Fitzgerald Soumit Roy - Jones Trading John Newman - Canaccord Genuity Matthew Biegler - Oppenheimer Joe Pantginis - H.C. Wainwright Edward Tenthoff - Piper Sandler Operat ...

[PART I—FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=6&type=section&id=Item%201%20%E2%80%93%20Financial%20Statements) This section presents the unaudited condensed consolidated interim financial statements for the periods ended September 30, 2022, and 2021, including detailed notes on accounting policies and financial items [Condensed Consolidated Interim Statements of Financial Position](index=7&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Financial%20Position) Total assets decreased to **$57.0 million** as of September 30, 2022, from **$82.5 million** at December 31, 2021, primarily due to reduced cash and investments, while total liabilities increased and shareholders' equity declined Condensed Consolidated Statement of Financial Position (in thousands of US dollars) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $56,577 | $81,737 | | **Total assets** | $57,048 | $82,525 | | **Total current liabilities** | $10,233 | $8,174 | | **Total liabilities** | $10,234 | $8,289 | | **Total shareholders' equity** | $46,814 | $74,236 | | **Total liabilities and shareholders' equity** | $57,048 | $82,525 | [Condensed Consolidated Interim Statements of Loss and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) The company reported no revenue, with a net loss of **$31.8 million** for the nine months ended September 30, 2022, an improvement from **$41.0 million** in 2021, driven by lower operating expenses Statement of Loss and Comprehensive Loss Highlights (in thousands of US dollars, except per share data) | | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue | $ - | $ - | | Research and development | $21,312 | $25,777 | | General and administrative | $10,887 | $15,322 | | **Operating expenses** | **$32,199** | **$41,099** | | **Net loss** | **$(31,823)** | **$(41,030)** | | **Basic loss per common share** | **$(0.34)** | **$(0.46)** | [Condensed Consolidated Interim Statements of Changes in Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity decreased from **$74.2 million** at December 31, 2021, to **$46.8 million** at September 30, 2022, primarily due to the **$31.8 million** net loss, partially offset by stock issuances and compensation Changes in Shareholders' Equity (in thousands of US dollars) | Description | Nine months ended Sep 30, 2022 | | :--- | :--- | | **Balance, December 31, 2021** | **$74,236** | | Net loss | $(31,823) | | Stock-based compensation | $4,346 | | Common shares issued (net) | $72 | | Other comprehensive loss | $(17) | | **Balance, September 30, 2022** | **$46,814** | [Condensed Consolidated Interim Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Interim%20Statements%20of%20Cash%20Flows) Cash used in operating activities totaled **$23.7 million** for the nine months ended September 30, 2022, offset by **$12.5 million** from investing activities, resulting in a net **$11.1 million** decrease in cash and equivalents Cash Flow Summary (in thousands of US dollars) | | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Cash used in operating activities | $(23,671) | $(27,260) | | Cash from (used in) investing activities | $12,493 | $(15,198) | | Cash from financing activities | $65 | $160 | | **Decrease in cash and cash equivalents** | **$(11,123)** | **$(42,298)** | | **Cash and cash equivalents, end of period** | **$27,991** | **$75,095** | [Notes to Condensed Consolidated Interim Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Interim%20Financial%20Statements) These notes detail the basis of presentation, significant accounting policies, and breakdowns of key financial items, including the company's clinical-stage nature, reliance on equity financing, and sufficiency of cash reserves for at least 12 months - The company is a clinical-stage precision oncology company and does not expect to generate positive cash flow from operations for the foreseeable future[30](index=30&type=chunk)[31](index=31&type=chunk) - Management believes that cash, cash equivalents, and investments on hand at September 30, 2022, will be sufficient to finance operations for at least **12 months** from the financial statement issuance date[32](index=32&type=chunk) - During the nine months ended September 30, 2022, the company issued **54,687 shares** under the 2020 ATM Facility for net proceeds of **$50 thousand**[62](index=62&type=chunk) - In October 2022, the company filed a new base shelf prospectus allowing for the distribution of up to **$200 million** of securities, with the 2020 ATM Facility expiring upon its effectiveness[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results, detailing clinical program progress, liquidity, capital resources, and analysis of net loss components [Overview](index=23&type=section&id=OVERVIEW) Aptose Biosciences is a clinical-stage biotechnology company developing first-in-class targeted agents for life-threatening cancers, with two molecules, HM43239 and luxeptinib, in Phase 1 trials, and APTO-253 discontinued - Aptose is advancing two main clinical assets: HM43239 for R/R AML and luxeptinib for B-cell malignancies and AML[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) - The clinical program for APTO-253, a MYC oncogene inhibitor, was discontinued in December 2021 to prioritize other pipeline assets[91](index=91&type=chunk) [Program Updates](index=24&type=section&id=PROGRAM%20UPDATES) Significant progress is reported in clinical programs, with HM43239 completing dose exploration and receiving FDA Fast Track Designation, and luxeptinib showing improved PK with a new 'G3' formulation, while the company addresses a Nasdaq deficiency notice - HM43239 received FDA Fast Track Designation for R/R AML with FLT3 mutation in May 2022[97](index=97&type=chunk) - The HM43239 Phase 1/2 trial has completed dose exploration, selecting **120mg** as the optimal go-forward single agent dose and **80mg** for combination studies, with an expansion program planned for Q4 2022[100](index=100&type=chunk) - A new 'G3' formulation of luxeptinib is being developed, with PK modeling predicting up to an **18-fold improvement** in plasma steady-state exposure compared to the original formulation[107](index=107&type=chunk)[109](index=109&type=chunk) - On July 18, 2022, the company received a Nasdaq deficiency notice for its bid price being below **$1.00** for **30 consecutive days** and has **180 days** (until January 16, 2023) to regain compliance[121](index=121&type=chunk)[122](index=122&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of September 30, 2022, the company held **$55.4 million** in cash and investments, with **$46.3 million** in working capital, deemed sufficient for **12 months** of operations, supported by a new **$200 million** shelf prospectus for equity financing Liquidity Position (in thousands) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,991 | $39,114 | | Investments | $27,402 | $40,014 | | **Total** | **$55,393** | **$79,128** | | **Working capital** | **$46,344** | **$73,563** | - Management believes current cash, cash equivalents, and investments are sufficient to fund operations for at least **12 months** from the report's issuance date[126](index=126&type=chunk) - In October 2022, a new **$200 million** base shelf prospectus was filed and declared effective, replacing the expired 2020 ATM facility[127](index=127&type=chunk)[128](index=128&type=chunk) Cash Flow Summary (in thousands) | | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(23,671) | $(27,260) | | Net cash from (used in) investing activities | $12,493 | $(15,198) | | Net cash from financing activities | $65 | $160 | [Results of Operations](index=32&type=section&id=RESULTS%20OF%20OPERATIONS) Net loss for the nine months ended September 30, 2022, decreased to **$31.8 million** from **$41.0 million** in the prior year, driven by reduced R&D expenses due to lower manufacturing costs and program discontinuation, and lower general and administrative expenses from decreased stock-based compensation Research and Development Expenses (in thousands) | Program | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | HM43239 | $6,570 | $ - | | Luxeptinib | $6,624 | $14,111 | | APTO-253 | $345 | $2,976 | | Personnel & Other | $7,773 | $8,690 | | **Total** | **$21,312** | **$25,777** | - The decrease in luxeptinib program costs by **$7.5 million** was primarily due to lower manufacturing costs as the current formulation requires less API[145](index=145&type=chunk) General and Administrative Expenses (in thousands) | Category | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | G&A (excluding items below) | $8,401 | $7,568 | | Stock-based compensation | $2,423 | $7,650 | | Depreciation | $63 | $104 | | **Total** | **$10,887** | **$15,322** | - Stock-based compensation decreased by **$5.2 million**, primarily due to lower grant date fair values of options granted and a large modification charge recognized in the prior year period[151](index=151&type=chunk) [Critical Accounting Policies](index=36&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Critical accounting policies and estimates remain materially unchanged from the 2021 Annual Report, with significant judgment applied to estimating research and development expenses, which included **$0.6 million** in prepaid and **$4.9 million** in accrued liabilities as of September 30, 2022 - There were no material changes to critical accounting policies and estimates during the nine months ended September 30, 2022[155](index=155&type=chunk) - Management makes significant judgments in estimating R&D expenses, with prepaid R&D expenses at **$589 thousand** and accrued R&D liabilities at approximately **$4.9 million** as of September 30, 2022[157](index=157&type=chunk) [Qualitative and Quantitative Disclosures about Market Risk](index=37&type=section&id=Item%203%20%E2%80%93%20Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Aptose is not required to provide qualitative and quantitative disclosures about market risk under SEC regulations - The company is not required to provide this information as it qualifies as a smaller reporting company[161](index=161&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of September 30, 2022, the company's disclosure controls and procedures are effective[162](index=162&type=chunk) - There were no changes in internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[164](index=164&type=chunk) [PART II—OTHER INFORMATION](index=37&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) The company is not currently involved in any material active legal actions, though it may be subject to ordinary course legal proceedings - The company is not involved in any material active legal actions[165](index=165&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[166](index=166&type=chunk) [Exhibits](index=38&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists exhibits filed concurrently with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data - The report includes filed exhibits such as CEO and CFO certifications (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act) and Inline XBRL financial data[167](index=167&type=chunk) [Signatures](index=39&type=section&id=Signatures) The quarterly report was officially signed and authorized on November 1, 2022, by William G. Rice, Ph.D., President and Chief Executive Officer of Aptose Biosciences Inc - The report was signed on November 1, 2022, by William G. Rice, Ph.D., President and Chief Executive Officer[169](index=169&type=chunk)

Aptose Biosciences Inc. (NASDAQ:APTO) Q2 2022 Earnings Conference Call August 2, 2022 5:00 PM ET Company Participants Susan Pietropaolo - Managing Director William Rice - Chairman, President and CEO Fletcher Payne - SVP and Chief Financial Officer Rafael Bejar - SVP and Chief Medical Officer Conference Call Participants Matthew Biegler - Oppenheimer Li Watsek - Cantor Fitzgerald Edward Tenthoff - Piper Sandler Soumit Roy - Jones Trading John Newman - Canaccord Genuity Operator Good day, and thank you for st ...

Aptose Biosciences Inc. (NASDAQ:APTO) Q1 2022 Earnings Conference Call May 9, 2022 5:00 PM ET Company Participants Dr. William G. Rice – Chairman, President and Chief Executive Officer Dr. Rafael Bejar – Senior Vice President and Chief Medical Officer Dan Ferry – Managing Director, LifeSci Advisors LLC Conference Call Participants Gregory Renza – RBC Capital Markets Matthew Biegler – Oppenheimer & Co. Inc. Li Watsek – Cantor Fitzgerald Matthew Cross – Allegiance Global Partners Operator Welcome to the Aptos ...