Ocuphire Pharma(OCUP) - 2018 Q4 - Annual Report

PART I Business Description 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 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] - RX-3117 has received orphan drug designation for pancreatic cancer from both the U.S. FDA and the European Commission[13][22] 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 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][42] 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 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][47] - 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][54][55][56] - 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][71] - 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][76][77][81] Intellectual Property 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 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] - Clinical trial collaboration with Merck to evaluate RX-5902 in combination with KEYTRUDA® for metastatic TNBC[108] - License agreement with KRICT for RX-5902 intellectual property, requiring a $1 million milestone payment upon first marketing approval[112] Risk Factors 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][123] - 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][136][141] - 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][196] - Competition Risk: The biotechnology industry is intensely competitive, and competitors may develop more effective or safer products or obtain regulatory approval more rapidly[178] - 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][206] Unresolved Staff Comments The company reports no unresolved staff comments - None[219] Properties 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] Legal Proceedings 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] Mine Safety Disclosures This item is not applicable to the company - Not applicable[222] PART II Market for Registrant's Common Equity and Related Matters 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] - There were no repurchases of equity securities in 2018[226] Selected Financial Data 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) 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) 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 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][272] - 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] Controls and Procedures 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] - There were no material changes to internal control over financial reporting in the fourth quarter of 2018[280] - Management assessed internal control over financial reporting using the COSO framework (2013) and concluded it was effective as of December 31, 2018[284] PART III Directors, Executive Officers, Compensation, and Other Matters 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][288][289] Exhibits and Financial Statement Schedules Financial Statements 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 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 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 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 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] - In October 2018, the company raised gross proceeds of approximately $7.5 million through a registered direct offering of common stock and warrants[362] - 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][394] - 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] - Subsequent to year-end, in January 2019, the company closed an underwritten public offering for gross proceeds of approximately $8.6 million[415]