PART I [Business Description](index=5&type=section&id=Item%201.%20Description%20of%20Business) Rexahn Pharmaceuticals is a clinical-stage biopharmaceutical company developing next-generation cancer therapies, relying on third parties for R&D and manufacturing [Overview and Pipeline](index=5&type=section&id=Overview%20and%20Pipeline) Rexahn is a clinical-stage biopharmaceutical company advancing RX-3117 for pancreatic/bladder cancer and RX-5902 for triple-negative breast cancer, with RX-0301 in preclinical development - The company's lead clinical-stage product candidates are RX-3117 (pancreatic/bladder cancer) and RX-5902 (triple-negative breast cancer)[13](index=13&type=chunk) - RX-3117 has received orphan drug designation for pancreatic cancer from both the U.S. FDA and the European Commission[13](index=13&type=chunk)[22](index=22&type=chunk) Key Product Candidate Status | Product Candidate | Indication | Development Stage | Key Recent Data/Event | | :--- | :--- | :--- | :--- | | **RX-3117** | Metastatic Pancreatic Cancer | Phase 2a (Combination w/ ABRAXANE®) | Preliminary data showed a **38% overall response rate** in 24 evaluable patients. Target enrollment of 40 patients reached in Feb 2019 | | **RX-3117** | Advanced Bladder Cancer | Phase 2a (Monotherapy) | Preliminary signs of efficacy observed, including a complete response. No additional trials currently planned | | **RX-5902** | Metastatic TNBC | Phase 2 (Combination w/ KEYTRUDA®) | Collaboration with Merck established. Monotherapy trial enrollment ceased in Dec 2018 to focus on the combination trial | | **RX-0301** | Hepatocellular Carcinoma (HCC) | Preclinical | Being developed in collaboration with Zhejiang Haichang Biotechnology Co., Ltd | [Competition](index=11&type=section&id=Competition) The company faces intense competition from larger pharmaceutical and biotech firms with superior resources, with specific competitors for each product candidate - The biotechnology and pharmaceutical industries are intensely competitive, with many competitors having substantially greater financial resources and experience than Rexahn[40](index=40&type=chunk)[42](index=42&type=chunk) Competitive Landscape by Product Candidate | Product Candidate | Competing Mechanisms/Products | Key Competitors | | :--- | :--- | :--- | | **RX-3117** | Anti-metabolite mechanism, nucleoside analogues | NuCana (NUC-1031), capecitabine, gemcitabine | | **RX-5902** | Other mechanisms for TNBC (e.g., PARP inhibitors, PD-1 inhibitors) | AstraZeneca (LYNPARZA®), Immunomedics, Genentech (TECENTRIQ®) | | **RX-0301** | Akt-1 inhibitors | Merck & Co., GlaxoSmithKline, AstraZeneca, Gilead Sciences, MEI Pharma, PIQUR Therapeutics | [Government Regulation](index=12&type=section&id=Government%20Regulation) Rexahn's operations are subject to extensive government regulation by the FDA and foreign authorities, covering product development, testing, approval, and post-market activities - The company's product candidates require rigorous preclinical and clinical testing and regulatory approval by the FDA and foreign authorities before commercialization[44](index=44&type=chunk)[47](index=47&type=chunk) - The clinical trial process typically involves three phases (Phase 1, 2, and 3) to assess safety, efficacy, and optimal dosage before an NDA can be submitted[52](index=52&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - RX-3117 has received orphan drug designation for pancreatic cancer from the FDA (September 2014) and the European Commission (January 2018), which provides potential benefits like market exclusivity[69](index=69&type=chunk)[71](index=71&type=chunk) - Post-approval, the company is subject to ongoing regulations including cGMP for manufacturing, restrictions on sales and marketing, and compliance with fraud and abuse laws like the federal Anti-Kickback Law[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[81](index=81&type=chunk) [Intellectual Property](index=23&type=section&id=Intellectual%20Property) The company protects its product candidates through patents, trade secrets, and know-how, holding U.S. and foreign patents expiring between 2023 and 2036 Patent Portfolio Expiration Summary | Product Candidate | Patent Families | Key Expiration Dates | | :--- | :--- | :--- | | **RX-3117** | 3 | 2025, 2034, 2036 | | **RX-5902** | 3 | 2025, 2034, 2036 | | **RX-0301** | 1 | 2023 - 2025 | [Collaboration and License Arrangements](index=24&type=section&id=Collaboration%20and%20License%20Arrangements) Rexahn has collaborations with Zhejiang Haichang for RX-0301 in China, Merck for RX-5902 with KEYTRUDA®, and a license agreement with KRICT for RX-5902 - Collaboration with Zhejiang Haichang for RX-0301 development in China, with Haichang funding up to **$10 million** through a Phase 2a trial[107](index=107&type=chunk) - Clinical trial collaboration with Merck to evaluate RX-5902 in combination with KEYTRUDA® for metastatic TNBC[108](index=108&type=chunk) - License agreement with KRICT for RX-5902 intellectual property, requiring a **$1 million** milestone payment upon first marketing approval[112](index=112&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, operational, third-party reliance, and intellectual property risks, including a history of losses and the need for additional capital - **Financial Risks:** The company has no product revenues, a history of significant net losses (**$154.7 million** accumulated deficit as of Dec 31, 2018), and will need to raise additional capital to fund operations[120](index=120&type=chunk)[123](index=123&type=chunk) - **Clinical and Regulatory Risks:** Product candidates are in early stages, and clinical trials are expensive, time-consuming, and may not be successful, with FDA approval being a long and uncertain process[135](index=135&type=chunk)[136](index=136&type=chunk)[141](index=141&type=chunk) - **Third-Party Reliance Risks:** The company depends on third-party CROs to conduct clinical trials and on third-party manufacturers for drug supply, exposing it to risks of delays, substandard performance, and supply chain disruptions[192](index=192&type=chunk)[196](index=196&type=chunk) - **Competition Risk:** The biotechnology industry is intensely competitive, and competitors may develop more effective or safer products or obtain regulatory approval more rapidly[178](index=178&type=chunk) - **Intellectual Property Risks:** Success depends on the ability to obtain and maintain patent protection, which is uncertain and subject to legal challenges and changes in patent law[203](index=203&type=chunk)[206](index=206&type=chunk) [Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[219](index=219&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Description%20of%20Property) The company leases approximately 7,193 square feet of office space in Rockville, Maryland, with the lease expiring in June 2019 - The company leases approximately **7,193 square feet** of office space in Rockville, Maryland, under a lease expiring in June 2019[220](index=220&type=chunk) [Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any litigation or legal proceedings expected to have a material adverse effect on its business - The company is not currently party to any material legal proceedings[221](index=221&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[222](index=222&type=chunk) PART II [Market for Registrant's Common Equity and Related Matters](index=51&type=section&id=Item%205.%20Market%20for%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE American under "RNN", with no equity repurchases in 2018 - Common stock trades on NYSE American under the ticker "**RNN**"[225](index=225&type=chunk) - There were no repurchases of equity securities in 2018[226](index=226&type=chunk) [Selected Financial Data](index=52&type=section&id=Item%206.%20Selected%20Financial%20Data) The company reported no revenues for the past five years, with a **$14.4 million** net loss in 2018 and an accumulated deficit of **$154.7 million** Selected Financial Data (Years Ended December 31) | (in thousands, except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Statement of Operations Data** | | | | | | | Revenues | $0 | $0 | $0 | $0 | $0 | | Loss from operations | $(20,538) | $(17,355) | $(16,413) | $(18,263) | $(13,269) | | Net Loss | $(14,369) | $(25,295) | $(9,307) | $(14,385) | $(18,522) | | Net Loss per share, basic and diluted | $(0.44) | $(0.92) | $(0.43) | $(0.79) | $(1.05) | | **Balance Sheet Data** | | | | | | | Cash, Cash Equivalents, and Marketable Securities | $14,726 | $26,831 | $20,316 | $23,440 | $32,698 | | Total Assets | $16,043 | $28,288 | $21,044 | $24,805 | $33,533 | | Accumulated Deficit | $(154,687) | $(140,319) | $(115,024) | $(105,717) | $(91,332) | | Total Stockholders' Equity | $10,563 | $16,769 | $17,058 | $18,776 | $26,580 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=53&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2018, Rexahn's net loss decreased to **$14.4 million** due to warrant valuation gains, despite increased R&D and G&A expenses, with management projecting sufficient liquidity for 12 months [Results of Operations (2018 vs. 2017)](index=55&type=section&id=Results%20of%20Operations) The 2018 net loss of **$14.4 million** improved from 2017's **$25.3 million**, primarily due to a **$5.5 million** gain on warrant liabilities, despite increased operating expenses Comparison of Operations (Years Ended December 31) | (in thousands) | 2018 | 2017 | Change (%) | | :--- | :--- | :--- | :--- | | General and administrative expenses | $7,429 | $6,639 | **11.9%** | | Research and development expenses | $13,109 | $10,715 | **22.3%** | | **Loss from Operations** | **$(20,538)** | **$(17,355)** | **18.3%** | | Unrealized gain (loss) on warrants | $5,546 | $(7,594) | N/A | | **Net Loss** | **$(14,369)** | **$(25,295)** | **(43.2%)** | | Net Loss per share | $(0.44) | $(0.92) | **(52.2%)** | Research and Development Expenses by Project | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | RX-3117 | $6,126 | $4,559 | | RX-5902 | $3,104 | $2,020 | | RX-0201 | $651 | $536 | | Preclinical, Personnel and Overhead | $3,227 | $3,601 | | **Total R&D Expenses** | **$13,109** | **$10,715** | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity relies on capital raises, with **$18.8 million** cash used in operations in 2018, and management believes current cash is sufficient for the next 12 months Summary of Cash Flows (Years Ended December 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(18,839) | $(15,420) | | Net Cash Provided By (Used In) Investing Activities | $11,911 | $(9,373) | | Net Cash Provided by Financing Activities | $6,773 | $22,114 | | **Net Decrease in Cash and Cash Equivalents** | **$(155)** | **$(2,679)** | - The company raised gross proceeds of **$7.5 million** in a registered direct offering in October 2018 and **$8.6 million** in an underwritten public offering in January 2019[271](index=271&type=chunk)[272](index=272&type=chunk) - Management believes current cash resources, including the January 2019 financing, are sufficient to cover cash flow requirements for at least the next **12 months**[273](index=273&type=chunk) [Controls and Procedures](index=61&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, 2018, with no material changes in Q4 2018 - Management concluded that disclosure controls and procedures were effective as of December 31, 2018[279](index=279&type=chunk) - There were no material changes to internal control over financial reporting in the fourth quarter of 2018[280](index=280&type=chunk) - Management assessed internal control over financial reporting using the COSO framework (2013) and concluded it was effective as of December 31, 2018[284](index=284&type=chunk) PART III [Directors, Executive Officers, Compensation, and Other Matters](index=64&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the company's Definitive Proxy Statement for its 2019 Annual Meeting of Shareholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2019 Proxy Statement[287](index=287&type=chunk)[288](index=288&type=chunk)[289](index=289&type=chunk) [Exhibits and Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) [Financial Statements](index=71&type=section&id=Financial%20Statements) Audited financial statements for 2018 and 2017 show a **$14.4 million** net loss in 2018, **$18.8 million** cash used in operations, and **$16.0 million** total assets as of December 31, 2018 [Balance Sheet](index=72&type=section&id=Balance%20Sheet) As of December 31, 2018, total assets decreased to **$16.0 million** from **$28.3 million**, primarily due to reduced cash and marketable securities, while total liabilities also decreased Balance Sheet Summary (as of December 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $8,744 | $8,899 | | Marketable securities | $5,982 | $17,932 | | **Total Assets** | **$16,043** | **$28,288** | | Warrant Liabilities | $2,308 | $7,854 | | **Total Liabilities** | **$5,480** | **$11,519** | | Accumulated Deficit | $(154,687) | $(140,319) | | **Total Stockholders' Equity** | **$10,563** | **$16,769** | [Statement of Operations](index=73&type=section&id=Statement%20of%20Operations) The 2018 net loss was **$14.37 million** (or **$0.44** per share), an improvement from 2017's **$25.29 million** loss, mainly due to a **$5.55 million** unrealized gain on warrants Statement of Operations Summary (Years Ended December 31) | (in thousands, except per share data) | 2018 | 2017 | | :--- | :--- | :--- | | Total Expenses | $20,538 | $17,355 | | Loss from Operations | $(20,538) | $(17,355) | | Unrealized gain (loss) on fair value of warrants | $5,546 | $(7,594) | | **Net Loss** | **$(14,369)** | **$(25,295)** | | Net loss per share, basic and diluted | $(0.44) | $(0.92) | [Statement of Cash Flows](index=76&type=section&id=Statement%20of%20Cash%20Flows) In 2018, net cash used in operating activities was **$18.8 million**, with **$11.9 million** provided by investing activities and **$6.8 million** from financing, resulting in a **$0.15 million** net decrease Statement of Cash Flows Summary (Years Ended December 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(18,839) | $(15,420) | | Net Cash Provided by (Used In) Investing Activities | $11,911 | $(9,373) | | Net Cash Provided by Financing Activities | $6,773 | $22,114 | | **Net Decrease in Cash and Cash Equivalents** | **$(155)** | **$(2,679)** | [Notes to Financial Statements](index=77&type=section&id=Notes%20to%20Financial%20Statements) Notes highlight the company's going concern dependency on capital, warrant liability re-measurement, **$147.1 million** NOL carryforwards, and a significant **$8.6 million** January 2019 financing - The company believes its cash, including proceeds from the January 2019 offering, is sufficient to fund operations for at least the next **12 months** from the financial statement issuance date[318](index=318&type=chunk) - In October 2018, the company raised gross proceeds of approximately **$7.5 million** through a registered direct offering of common stock and warrants[362](index=362&type=chunk) - Certain outstanding warrants are classified as liabilities and re-measured to fair value each period, resulting in a **$5.5 million** unrealized gain in 2018[387](index=387&type=chunk)[394](index=394&type=chunk) - As of December 31, 2018, the company had net operating loss carry-forwards of approximately **$147.1 million**, which are fully offset by a valuation allowance[395](index=395&type=chunk) - Subsequent to year-end, in January 2019, the company closed an underwritten public offering for gross proceeds of approximately **$8.6 million**[415](index=415&type=chunk)