ESSA Pharma (EPIX) - 2024 Q3 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary Cautionary Note Regarding Forward-Looking Statements Forward-looking statements in this report carry inherent risks and uncertainties, potentially causing actual results to differ materially from projections - Forward-looking statements include those related to advancing product candidates through clinical trials, patient recruitment, establishing collaborations, obtaining funding, timing and success of R&D programs, therapeutic benefits, intellectual property protection, competitive developments, profitability, CPRIT Grant, ATM Sales Agreement, business model implementation, commercialization, regulatory requirements, market acceptance, market risk, employee retention, future financial performance, and capital needs[3][4] - Key assumptions underlying forward-looking statements include the ability to conduct clinical studies, obtain regulatory approvals, achieve positive R&D results, secure sufficient financing, protect IP, successfully out-license/sell/in-license products, absence of material adverse industry/economy changes, attract/retain key personnel, comply with license terms, maintain strategic partnerships, and predict market competition[4] Risk Factor Summary Material factors making an investment in ESSA Pharma Inc. speculative are summarized, covering clinical, regulatory, financial, IP, and operational challenges - Risks include those related to clinical trial development, dependence on a single product candidate, license agreements, regulatory approval uncertainty, ability to conduct trials/submit applications, commercialization success, undesirable side effects, patient enrollment, FDA data acceptance, ongoing regulatory obligations, increased costs from prolonged trials, third-party reliance, manufacturing inexperience, foreign operations, supply chain disruptions, international regulatory approval, new legislation, funding uncertainty, dilution from financing, CPRIT Grant obligations, significant losses, limited operating history, reliance on proprietary technology, IP protection, third-party IP claims, computer system failures, business disruptions, personnel attraction/retention, third-party coverage/reimbursement, conflicts of interest, competition, market fluctuations, sales/marketing infrastructure, growth management, market acceptance, acquisitions/alliances, employee misconduct, product liability, compulsory licensing, public company costs, smaller reporting company status, international laws, fraud/abuse laws, environmental/health/safety laws, passive foreign investment company status, US investor legal actions, market price volatility, dividend policy, future security sales, active trading market maintenance, widespread health concerns, internal controls, corporate governance, and analyst coverage[5][6][7] PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Supplementary Data Unaudited condensed consolidated interim financial statements, including balance sheets, operations, cash flows, and equity changes, are presented with explanatory notes Condensed Consolidated Interim Balance Sheets Key Balance Sheet Figures | ASSETS | June 30, 2024 | September 30, 2023 | | :-------------------------- | :------------ | :----------------- | | Cash and cash equivalents | $85,985,140 | $33,701,912 | | Short-term investments | $44,709,312 | $114,374,489 | | Total assets | $132,666,307 | $149,122,131 | | LIABILITIES | | | | Total liabilities | $3,804,764 | $3,495,071 | | SHAREHOLDERS' EQUITY | | | | Total shareholders' equity | $128,861,543 | $145,627,060 | Condensed Consolidated Interim Statements of Operations and Comprehensive Loss Key Operating Results | OPERATING EXPENSES | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Research and development | $5,464,123 | $6,271,186 | $17,018,874 | $16,096,299 | | General and administration | $3,174,195 | $2,639,381 | $9,707,565 | $8,889,192 | | Total operating expenses | $(8,638,318) | $(8,912,094) | $(26,726,439) | $(24,991,312) | | Investment and other income | $1,408,160 | $1,614,048 | $4,536,761 | $3,881,974 | | Net loss for the period | $(7,233,747) | $(7,298,873) | $(22,187,604) | $(21,100,994) | | Comprehensive loss for the period | $(7,233,091) | $(7,256,184) | $(22,167,573) | $(21,087,993) | | Basic and diluted loss per share | $(0.16) | $(0.17) | $(0.50) | $(0.48) | Condensed Consolidated Interim Statements of Cash Flows Key Cash Flow Activities | CASH FLOWS FROM | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | | Operating Activities (Net cash used) | $(19,350,065) | $(15,293,299) | | Investing Activities (Net cash provided by (used in)) | $70,764,832 | $(3,262,500) | | Financing Activities (Net cash provided by (used in)) | $865,839 | $(54,509) | | Change in cash and cash equivalents | $52,283,228 | $(18,609,484) | | Cash and cash equivalents, end of period | $85,985,140 | $38,466,991 | Condensed Consolidated Interim Statement of Changes in Shareholders' Equity Shareholders' Equity Changes | SHAREHOLDERS' EQUITY | September 30, 2023 | June 30, 2024 | | :----------------------------- | :----------------- | :------------ | | Common shares | $278,161,537 | $279,752,182 | | Additional paid-in capital | $49,047,280 | $52,858,691 | | Accumulated other comprehensive loss | $(2,120,398) | $(2,100,367) | | Accumulated deficit | $(179,461,359) | $(201,648,963) | | Total | $145,627,060 | $128,861,543 | Notes to the Condensed Consolidated Interim Financial Statements Essential context and detail for interim financial statements are provided, covering operations, accounting principles, recent pronouncements, and financial instrument specifics Nature of Operations - ESSA Pharma Inc. was incorporated on January 6, 2009, and is listed on the Nasdaq Capital Market under the symbol "EPIX"[17] - The Company focuses on developing small molecule drugs for prostate cancer, holding a license to certain patents ("NTD"). As of June 30, 2024, no products are in commercial production or use[17] Basis of Presentation - The unaudited condensed consolidated interim financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information, reflecting all necessary normal recurring adjustments[18][19] - These statements include accounts of the Company and its wholly-owned subsidiaries, with inter-company transactions eliminated upon consolidation, and are prepared on a historical cost basis, except for certain financial assets measured at fair value[20] Recent Accounting Pronouncements - Management believes that recently issued, but not yet effective, accounting standards would not have a material effect on the Company's condensed consolidated interim financial statements[23] Short-Term Investments - Short-term investments consist of guaranteed investment certificates (GICs) and U.S. treasury securities, classified as available-for-sale and current assets[24][25] Short-Term Investments Breakdown | Investment Type | Amortized Cost | Unrealized Losses | Accrued Investment Income | Estimated Fair Value | | :----------------------- | :------------- | :---------------- | :------------------------ | :------------------- | | U.S. Treasury securities | $22,653,914 | $(23,376) | $44,752 | $22,675,290 | | GICs and Term deposits | $21,141,314 | — | $892,708 | $22,034,022 | | Balance, end of period | $43,795,228| $(23,376) | $937,460 | $44,709,312 | - As of June 30, 2024, short-term investments had an aggregate fair market value of $44.7 million (September 30, 2023 – $114.4 million) and an aggregate gross unrealized loss position of $23,376 (September 30, 2023 - $43,248). No allowance for credit losses was recorded[27] Prepaids Prepaid Expenses Breakdown | Prepaid Category | June 30, 2024 | September 30, 2023 | | :----------------------------------- | :------------ | :----------------- | | Prepaid insurance | $410,678 | $24,839 | | Prepaid CMC and clinical expenses and deposits | $495,768 | $181,835 | | Other deposits and prepaid expenses | $306,572 | $378,746 | | Balance, end of period | $1,213,018| $585,420 | Accounts Payable and Accrued Liabilities Accounts Payable and Accrued Liabilities Breakdown | Liability Category | June 30, 2024 | September 30, 2023 | | :---------------------------------- | :------------ | :----------------- | | Accounts payable | $1,908,037 | $2,028,265 | | Accrued expenses | $869,149 | $845,730 | | Employee compensation and vacation accruals | $685,436 | $540,748 | | Balance, end of period | $3,462,622| $3,414,743 | Operating Lease Operating Lease Details | Operating Lease Item | September 30, 2023 | June 30, 2024 | | :------------------------------- | :----------------- | :------------ | | Operating lease right-of-use assets | $68,008 | $318,275 | | Operating lease liabilities | $80,328 | $342,142 | | Current portion of operating lease liability | $80,328 | $112,435 | | Non-current operating lease liability | — | $229,707 | - The Company recognizes a right-of-use asset and a lease liability for its operating leases, calculated using an incremental borrowing rate of 10.25%. As of June 30, 2024, the remaining lease term for the South San Francisco office was 36 months[30][31] Shareholders' Equity Omnibus Incentive Plan - The Company adopted an Omnibus Incentive Plan on February 25, 2021, allowing for issuance of stock options, share appreciation rights, restricted shares, restricted share units, and other share-based awards. As of June 30, 2024, only stock options have been issued under this plan[33] - The Omnibus Plan has a maximum of 10,810,907 common shares reserved for issuance as of June 30, 2024[34] Employee Share Purchase Plan - The ESPP allows eligible employees to purchase common shares at not less than 85% of the market price, with offerings consisting of six-month periods[35] - As of June 30, 2024, 192,142 common shares were reserved for issuance under the ESPP. During the nine months ended June 30, 2024, 16,694 shares were issued upon exercise of Purchase Rights[35][37] Valuation Assumptions | Valuation Assumption | 2024 | 2023 | | :------------------------------- | :--------- | :--------- | | Risk-free interest rate | 5.12 % | 3.47 % | | Expected life of share purchase rights | 6 months | 6 months | | Expected annualized volatility | 69.20 % | 119.34 % | | Dividend yield | — | — | Stock Options Stock Option Activity Summary | Stock Option Activity | Number of Options | Weighted Average Exercise Price* | | :------------------------------- | :---------------- | :------------------------------- | | Balance, September 30, 2023 | 8,112,774 | $4.97 | | Options granted | 1,728,750 | $8.81 | | Options exercised | (251,427) | $(3.26) | | Options expired/forfeited | (283,229) | $(6.92) | | Balance outstanding, June 30, 2024 | 9,306,868 | $5.67 | | Balance exercisable, June 30, 2024 | 6,901,374 | $4.84 | Share-based Compensation Expense | Share-based Compensation (Nine Months Ended June 30) | 2024 | 2023 | | :--------------------------------------------------- | :------------ | :------------ | | Research and development expense | $1,815,807 | $2,138,866 | | General and administrative | $2,682,026 | $2,020,267 | | Total | $4,497,833| $4,159,133| Valuation Assumptions | Valuation Assumption | 2024 | 2023 | | :------------------------------- | :----------- | :----------- | | Risk-free interest rate | 4.20 % | 3.78 % | | Expected life of options | 10.0 years | 10.0 years | | Expected annualized volatility | 228.62 % | 186.50 % | | Dividend yield | — | — | Warrants Warrant Activity Summary | Warrant Activity | Number of Warrants | Weighted Average Exercise Price | | :------------------------------- | :----------------- | :------------------------------ | | Balance, September 30, 2023 | 2,927,477 | $0.11 | | Warrants expired | (7,477) | $(42.80) | | Balance outstanding and exercisable, June 30, 2024 | 2,920,000 | $0.00 | - As of June 30, 2024, 2,920,000 warrants were outstanding, enabling holders to acquire common shares at an exercise price of $0.0001, with an expiry date of August 23, 2024[45] Related Party Transactions - As of June 30, 2024, $112,923 (September 30, 2023 - $98,360) was due to related parties for key management personnel compensation and expense reimbursements. These amounts are non-interest bearing with no fixed repayment terms[46] Segmented Information - The Company operates in a single industry: the development of small molecule drugs for prostate cancer. Its right-of-use assets are located in the USA[47] Financial Instruments and Risk - The Company's financial instruments include cash and cash equivalents, short-term investments, receivables, and accounts payable and accrued liabilities. Fair values of most instruments approximate carrying values due to short maturity, while U.S. treasury securities and money market funds are measured using Level 2 inputs[48] Credit Risk - Credit risk is managed by placing cash in segregated funds with major financial institutions and maintaining an investment policy with minimum investment grades. Cash and cash equivalents include balances in Canada and the United States, with amounts exceeding insured limits[50][51] Liquidity Risk - As of June 30, 2024, the Company had working capital of $128,515,998. The Company does not generate revenue and relies on external financing, which is dependent on market conditions[52] Market Risk - Market risk includes interest rate risk and foreign currency risk. Interest income is not significant to the Company's capital management. Foreign currency risk relates to net monetary assets in Canadian dollars and Euro, but is not currently significant, and the Company does not engage in hedging activities[52][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ESSA Pharma Inc.'s business, clinical programs, strategy, trial updates, competition, IP, regulatory environment, and financial performance are discussed Overview - ESSA is a clinical-stage pharmaceutical company focused on developing novel small molecule inhibitors of the N-terminal domain (NTD) of the androgen receptor (AR) for prostate cancer treatment, particularly in combination with second-generation antiandrogen drugs[55] - The Company's lead product candidate, masofaniten (EPI-7386), is designed to disrupt the AR signaling pathway by selectively binding to the NTD, offering a unique mechanism that may bypass resistance mechanisms to current antiandrogens[55][56][60] - Prostate cancer is the second most frequently diagnosed cancer among men in the U.S., with a significant unmet therapeutic need in patients who have failed second-generation antiandrogen therapies[57][62] Completed Phase 1 Clinical Study of EPI-506 - ESSA conducted a Phase 1 clinical study of its first-generation Aniten compound, EPI-506, from 2015 to 2017, evaluating safety, tolerability, pharmacokinetics, and anti-tumor activity in mCRPC patients refractory to current standard of care[64] - The study enrolled 28 patients, with PSA declines observed in five patients, predominantly in higher dose cohorts (≥1280 mg). EPI-506 was generally well-tolerated up to 2400 mg, but at 3600 mg, gastrointestinal adverse events and a transient Grade 3 increase in liver enzymes were observed, leading to DLTs[68][69] - Due to pharmacokinetic limitations and the potential for more potent next-generation inhibitors, ESSA discontinued further clinical development of EPI-506 in September 2017 to focus on its next-generation Anitens, including masofaniten (EPI-7386)[70] Next Generation Aniten Molecules - ESSA's next-generation Aniten compounds, including masofaniten (EPI-7386), demonstrate significantly higher potency (20 times higher than EPI-506), increased metabolic stability, and more favorable pharmaceutical properties in preclinical studies[71] Our Strategy - ESSA's strategic approach involves combining Aniten compounds with second-generation antiandrogens in earlier lines of therapy for nmCRPC, mCRPC, mHSPC, and neo-adjuvant prostate cancer[72] - The Company aims to complete clinical development of masofaniten (EPI-7386) as a monotherapy for mCRPC patients resistant to current standard of care, assessing safety, tolerability, efficacy, and pharmacological/biological characteristics[72] - ESSA continues preclinical studies on other Aniten molecules and potential applications for AR NTD inhibitors[74] The Identification and Characteristics of Masofaniten (EPI-7386) - Masofaniten (EPI-7386) was nominated as the lead clinical candidate on March 26, 2019, demonstrating higher potency, metabolic stability, and effectiveness in preclinical studies compared to EPI-506[76] - An IND was submitted to the FDA on March 30, 2020, and allowed on April 30, 2020, with clinical testing commencing in July 2020[77] Advancing Masofaniten (EPI-7386) Through Clinical Development Masofaniten (EPI-7386) is advancing through two clinical trials, focusing on safety, drug-drug interactions, and anti-tumor activity in prostate cancer patients Phase 1 Clinical Trial - EPI-7386-CS-001 (Monotherapy & Combination) - The Phase 1a dose escalation for monotherapy has completed enrollment, establishing 600 mg QD and 600 mg BID as doses for Phase 1b dose expansion[81][82] - Part B of the study is actively enrolling patients in two cohorts: combination with abiraterone acetate/prednisone for mHSPC or mCRPC, and combination with apalutamide for nmCRPC patients naive to second-generation anti-androgens[79] - The primary objectives of the combination cohorts are to assess safety and drug-drug interactions to inform recommended doses[79] Clinical Trial - EPI-7386-CS-010 – Combination Treatment with Enzalutamide - ESSA is conducting a Phase 1/2 study of masofaniten (EPI-7386) in combination with enzalutamide for mCRPC patients, in collaboration with Astellas and Pfizer[87][88] - The Phase 1 dose equilibration stage has completed enrollment, identifying 600 mg BID masofaniten with 160 mg enzalutamide as the recommended Phase 2 combination dose[88] - The Phase 2 randomized study, involving 120 patients, is currently enrolling in the U.S., Canada, Europe, and Australia, comparing the combination to single-agent enzalutamide[88] Clinical Trial - EPI-7386-CS-001 – Combination Treatments with Abiraterone and with Apalutamide - ESSA entered a clinical trial support agreement with Janssen to conduct a Phase 1 study evaluating masofaniten (EPI-7386) in combination with apalutamide or abiraterone acetate plus prednisone in earlier patient populations[89][103] - The amended protocol for EPI-7386-CS-001 includes a Part B Combination study with two cohorts: Cohort 1 (masofaniten + abiraterone acetate/prednisone for mHSPC or mCRPC) and Cohort 2 (single agent masofaniten for 12 weeks in nmCRPC, followed by combination with apalutamide)[90][91] - A third collaboration with Bayer is planned to evaluate masofaniten (EPI-7386) in combination with darolutamide in earlier line mCRPC patients, with ESSA providing masofaniten[92] Preclinical Development of Anitens and Other Indications - ESSA continues preclinical work on other potential clinical applications for NTD inhibitors, including AR ANITAC NTD degraders[92] - Preclinical data for AR ANITAC NTD degraders demonstrated their ability to degrade AR full length and AR splice variants in CRPC preclinical models, inhibiting NTD-mediated AR transcription and reducing AR protein[92][117] Recent Developments Recent scientific presentations and corporate activities are detailed, including clinical data, Phase 2 trial initiation, and corporate governance/financing changes 2024 Updates - Updated dose escalation data from the Phase 1/2 study of masofaniten combined with enzalutamide was presented at the 2024 ASCO Genitourinary Cancers Symposium[93] - The combination was well-tolerated, with most frequent adverse events being Grades 1 and 2. The recommended Phase 2 combination doses were identified as masofaniten 600 mg BID with enzalutamide 160 mg QD[94] - In evaluable patients (n=16), rapid, deep, and durable PSA reductions were observed: 88% achieved PSA50, 81% achieved PSA90, and 63% achieved PSA <0.2ng/mL. Median time to PSA progression was 16.6 months[95] 2023 Updates - Updates on the masofaniten/enzalutamide combination study were presented at the Prostate Cancer Foundation Scientific Retreat and ESMO 2023 Congress, confirming good tolerability and significant PSA reductions[96][99] - Enzalutamide minimally impacted masofaniten exposure, but twice-daily dosing mitigated the reduction, maintaining clinically relevant drug exposures[96] - The Company entered an ATM Sales Agreement with Jefferies LLC to sell up to US$50.0 million in common shares and initiated the Phase 2 portion of the masofaniten/enzalutamide combination study[100][101][102] 2022 Updates - Janssen suspended enrollment in its masofaniten combination study due to recruitment challenges, but initial clinical activity was observed[105] - Updated clinical data from the masofaniten/enzalutamide combination study showed favorable safety, with no DLTs, and anti-tumor activity, with four of six evaluable patients achieving PSA90 by 12 weeks[107] - Preclinical data for AR ANITAC NTD degraders were presented, demonstrating their potential to degrade AR full length and splice variants in CRPC models[105][117] Future Clinical Development Program Future clinical development focuses on masofaniten combination therapies in earlier prostate cancer, with single agent development requiring Phase 3 trials and specific patient populations Combination Therapy Development - ESSA is conducting combination studies of masofaniten (EPI-7386) with current antiandrogens in earlier prostate cancer patients, with future plans for randomized clinical trials in various patient populations[121] Single Agent Development - A Phase 2 single-arm clinical trial for masofaniten (EPI-7386) as a single agent may be conducted, depending on the ability to identify mCRPC patients whose tumors are still predominantly AR-driven[122] - Ultimately, at least one Phase 3 clinical trial would be required for full single agent regulatory approval, likely focusing on progression-free survival or overall survival against standard of care[123] Competition - The prostate cancer market is highly competitive, with many companies possessing greater financial resources and expertise. ESSA believes its product candidate has a strong competitive position due to its mechanistically unique approach of blocking AR-NTD activation, potentially bypassing resistance pathways[124] - Currently approved therapies include Enzalutamide (Xtandi), Abiraterone acetate (Zytiga, Yonsa), Apalutamide (Erleada), Darolutamide (Nubeqa), and others[125] - To ESSA's knowledge, no other AR-NTD antagonist is currently undergoing clinical trials for prostate cancer[124] Patents and Proprietary Rights ESSA's IP strategy, based on a licensed portfolio, maintains a strong patent position for its Aniten series, with protection expected until 2036-2043 License Agreement with UBC and the BCCA - ESSA has an exclusive worldwide license agreement with the British Columbia Cancer Agency and the University of British Columbia for intellectual property related to compounds that modulate AR activity[125][126] - The agreement requires minimum annual royalties of C$85,000, milestone payments (C$50,000 for Phase 2, C$900,000 for Phase 3), and low single-digit royalties on net sales, plus a percentage of sublicensing revenue[127][128] ESSA's Intellectual Property Strategy - ESSA retains all commercial rights for its Aniten series and owns a patent portfolio including 77 issued patents (20 U.S. patents) covering multiple EPI- and Aniten structural classes[129][130] - Patent applications for next-generation NTD inhibitors are pending, with expected expiration dates between 2036 and 2043, covering masofaniten (EPI-7386) and its methods of use[130] Regulatory Environment Product development is subject to stringent global regulatory oversight, involving preclinical/clinical testing, IND/CTA, multi-phase trials, NDA/NDS approval, and post-approval compliance Drug Products Development Process - The drug development process in the U.S. involves extensive preclinical tests, IND submission, IRB approval, human clinical trials (GCP), NDA submission, FDA advisory committee review, manufacturing facility inspections (cGMP), user fees, FDA approval, and post-approval requirements[136] Preclinical Studies - Preclinical studies are conducted in vitro and in animals to evaluate pharmacokinetics, metabolism, and toxic effects, providing safety evidence before human clinical trials, in compliance with GLP regulations[137] Initiation of Human Testing - Human testing requires administration of investigational products under qualified investigators, adherence to GCP, informed consent, and IRB review/approval of trial protocols. An IND/CTA must be filed and accepted before clinical trials begin[138] - Clinical trial progression is influenced by patient enrollment rates, disease incidence/severity, available treatments, potential side effects, and regulatory restrictions[139] Phase 1 Clinical Trials - Phase 1 clinical trials for cancer therapeutics typically involve a small number of patients to assess safety, dose-limiting toxicities, tolerability, pharmacokinetics, and to determine the dose for Phase 2 trials[140] Phase 2 Clinical Trials - Phase 2 clinical trials involve a larger patient population to identify adverse effects, safety risks, preliminarily evaluate efficacy for specific diseases, and determine optimal dosage and schedule[141] Phase 3 Clinical Trials - Phase 3 clinical trials test experimental drugs on a much larger, geographically dispersed patient population to establish clinical safety and effectiveness, generating information for risk-benefit assessment[142] - Typically, two adequate and well-controlled Phase 3 trials are required by the FDA to demonstrate drug efficacy, though a single trial may suffice in rare, highly persuasive cases[143] New Drug Application - Successful completion of clinical testing leads to the submission of an NDA (or NDS in Canada) to the FDA (or TPD) for marketing approval, including preclinical and clinical results, chemistry, manufacturing, controls, and labeling information[144] - The FDA conducts a preliminary review within 60 days, followed by an in-depth substantive review (typically 10 months, or 9 months for priority review). Pre-approval inspections of manufacturing facilities (cGMP) and clinical sites (GCP) are required[145][146][147] - The cost of preparing and submitting an NDA is substantial, exceeding $2,500,000, with additional annual program and establishment user fees[148] Post-Approval Requirements - Approved drugs are subject to continuous FDA regulation, including recordkeeping, periodic reporting, product sampling, distribution, advertising, promotion, and adverse event reporting[151] - Non-compliance or discovery of new problems post-approval can lead to sanctions such as labeling revisions, post-market studies, distribution restrictions (REMS), product recalls, fines, withdrawal of approval, or civil/criminal penalties[153] - Marketing, labeling, advertising, and promotion are strictly regulated, with drugs only promotable for approved indications. The PDMA also regulates drug distribution and samples[154] Orphan Designation and Exclusivity - ESSA may seek orphan drug designation for product candidates intended to treat rare diseases (fewer than 200,000 individuals in the U.S.)[155] - Orphan designation does not shorten the regulatory review process but grants seven years of market exclusivity upon first FDA approval for the designated indication, with limited exceptions[155][156] Selected Quarterly Financial Information Selected Quarterly Financial Data | Metric | June 30, 2024 | March 31, 2024 | December 31, 2023 | September 30, 2023 | | :------------------------- | :------------ | :------------- | :---------------- | :----------------- | | R&D expense | $5,464,123 | $6,177,987 | $5,376,764 | $5,226,231 | | G&A | $3,174,195 | $4,315,502 | $2,217,868 | $1,922,382 | | Comprehensive loss | $(7,233,091) | $(8,990,284) | $(5,944,198) | $(5,479,603) | | Basic/diluted loss per share | $(0.16) | $(0.20) | $(0.14) | $(0.12) | | Cash & cash equivalents | $85,985,140 | $91,683,074 | $35,344,517 | $33,701,912 | | Short-term investments | $44,709,312 | $44,205,592 | $106,775,273 | $114,374,489 | | Total assets | $132,666,307 | $137,896,175 | $144,489,279 | $149,122,131 | | Working capital | $128,515,998 | $133,123,568 | $140,337,994 | $145,301,807 | - ESSA has never been profitable and expects to incur increasing losses as it continues product development and seeks regulatory approvals. The comprehensive loss for the nine months ended June 30, 2024, was $22,167,573, compared to $21,087,993 for the same period in 2023[158][159] Results of Operations for the Nine Months Ended June 30, 2024 and 2023 For the nine months ended June 30, 2024, ESSA reported a $22.17 million comprehensive loss, driven by increased clinical costs, salaries, and legal fees, partially offset by reduced preclinical and manufacturing expenses Research and Development Expenditures Research and Development Expenditures Breakdown | R&D Expense Category | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | | Clinical | $6,891,138 | $4,230,255 | | Preclinical and data analysis | $2,832,804 | $4,765,110 | | Salaries and benefits | $2,309,430 | $2,017,145 | | Share-based payments | $1,837,353 | $2,140,972 | | Manufacturing | $1,223,189 | $1,810,716 | | Legal patents and license fees | $818,910 | $542,537 | | Consulting | $348,575 | $320,038 | | Royalties | $99,239 | $62,774 | | Total R&D Expense | $17,018,874 | $16,096,299 | - Overall R&D expense increased to $17,018,874 for the nine months ended June 30, 2024, from $16,096,299 in the prior year, driven by expanded clinical trials and associated variable costs[159][160] - Preclinical and data analysis costs decreased to $2,832,804 (2023 – $4,765,110), while manufacturing costs decreased to $1,223,189 (2023 - $1,810,716) as manufactured drug is now supplied to clinical trials[160][162] General and Administration Expenditures General and Administration Expenditures Breakdown | G&A Expense Category | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | | Salaries and benefits | $4,019,104 | $3,483,710 | | Share-based payments | $2,698,864 | $2,020,803 | | Insurance | $1,051,908 | $1,400,414 | | Professional fees | $948,608 | $846,213 | | Director fees | $327,875 | $288,667 | | Total G&A Expense | $9,707,565 | $8,889,192 | - Overall G&A expense increased to $9,707,565 for the nine months ended June 30, 2024, from $8,889,192 in the prior year, primarily due to increased corporate staff, wage adjustments, and higher professional fees related to financing activities[165][166] - Insurance expense decreased to $1,051,908 (2023 - $1,400,414) due to lower annual premiums for directors and officers insurance[166] Three Months Ended June 30, 2024 and 2023 For the three months ended June 30, 2024, ESSA's comprehensive loss was $7.23 million, consistent with the prior year, with R&D decreasing and G&A increasing due to personnel and director fees - Comprehensive loss for the three months ended June 30, 2024, was $7,233,091, compared to $7,256,184 for the same period in 2023[170] - R&D expenses decreased to $5,464,123 (2023 - $6,271,186), with preclinical and data analysis costs decreasing to $433,248 (2023 - $1,558,497) and manufacturing costs decreasing to $467,301 (2023 - $697,817)[171] - G&A expenses increased to $3,174,195 (2023 - $2,639,381), driven by higher salaries and benefits ($804,794 vs. $756,993) and director fees ($119,875 vs. $98,167), despite a decrease in professional fees[172] - Share-based payments for R&D were $851,971 (2023 - $599,621) and for G&A were $1,748,227 (2023 – $561,452)[173] Liquidity and Capital Resources - As of June 30, 2024, ESSA had working capital of $128,515,998 (September 30, 2023 - $145,301,807) and available cash reserves and short-term investments of $130,694,452 (September 30, 2023 - $148,076,401)[174] - The Company believes it has sufficient capital to satisfy obligations and planned expenditures for more than twelve months. Future cash requirements may necessitate additional funding through strategic collaborations, equity issuance, or other financing sources[174][175] Critical Accounting Policies and Estimates - The Company's critical accounting policies involve significant judgments and estimates, particularly in the valuation of equity instruments issued for services, which are continually evaluated[176][21] - Changes in accounting estimates are recognized prospectively in comprehensive income[178] Trend Information - ESSA is a clinical development stage company with no current revenue, focused on developing small molecule drugs for prostate cancer. Its financial success depends on advancing compounds through preclinical and clinical stages to commercialization[179] Off-Balance Sheet Arrangement - ESSA has no material undisclosed off-balance sheet arrangements that would significantly affect its operations, financial condition, or liquidity[180] Outstanding Share Data - As of August 5, 2024, ESSA had an unlimited number of authorized common shares (no par value), with 44,368,959 issued and outstanding. No preferred shares were issued[1][10][181] - As of August 1, 2024, there were 2,920,000 common shares issuable from warrants, 6,963,339 from exercisable stock options, and 2,343,529 from unexercisable outstanding options[181] Safe Harbor - This section refers to the "Cautionary Note Regarding Forward-Looking Statements" for information on safe harbor provisions[182] Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, ESSA Pharma Inc. is not required to provide quantitative and qualitative disclosures about market risk - ESSA Pharma Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[184] Item 4. Controls and Procedures ESSA Pharma Inc.'s disclosure controls and internal control over financial reporting were evaluated and deemed effective as of June 30, 2024, with no material changes Evaluation of Disclosure Controls and Procedures - Management, with CEO and CFO participation, evaluated the design and operating effectiveness of disclosure controls and procedures as of June 30, 2024[185] - They concluded that the disclosure controls and procedures were effective at the reasonable assurance level[186] Management's Annual Report on Internal Control over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting[187] - Based on an evaluation using the 2013 COSO framework, management concluded that internal control over financial reporting was effective as of June 30, 2024[188] Changes in Internal Control Over Financial Reporting - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024[189] PART II. OTHER INFORMATION Item 1. Legal Proceedings As of June 30, 2024, ESSA Pharma Inc. is not a party to any legal proceedings expected to materially affect its business or financial condition - As of June 30, 2024, ESSA is not involved in any legal proceedings expected to have a material adverse effect on its business[190] Item 1A. Risk Factors No material changes to risk factors from the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, have occurred - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended September 30, 2023[191] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds to report[191] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities to report[191] Item 4. Mine Safety Disclosures This item is not applicable to ESSA Pharma Inc - This item is not applicable[191] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2024 Trading Plans of Directors or Officers - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024[191] Item 6. Exhibits, Financial Statement Schedules Exhibits filed as part of the Form 10-Q include amended articles of incorporation, common share certificates, CEO/CFO certifications, and Inline XBRL documents - Exhibits include Amended Articles of Incorporation, Specimen common share certificate, Certifications of the Chief Executive Officer and Chief Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL Instance Document and Taxonomy Extension Documents[193]