Marker Therapeutics(MRKR) - 2018 Q4 - Annual Report

Part I Business Marker Therapeutics develops non-engineered MultiTAA T cell therapies and peptide vaccines, focusing on clinical advancement for hematological malignancies and solid tumors Overview and Strategy The company is a clinical-stage immuno-oncology firm developing MultiTAA T cell immunotherapies and peptide vaccines, aiming to expedite clinical development and commercialization - The company specializes in developing non-engineered, Multi-Tumor Associated Antigen (MultiTAA) T cell therapies and peptide-based vaccines for hematological malignancies and solid tumors[20] - Key strategic elements include expediting clinical development for lead candidates, advancing into Phase II trials for post-transplant AML in the second half of 2019, and continuing collaboration with BCM for research and manufacturing[24][25][27] - The company plans to invest in its platform to expand into new indications, explore dosing regimens, and leverage relationships with its founding institutions and scientific advisors[30][31] - A strategic review is underway to evaluate the peptide vaccine programs to determine future resource allocation, which may lead to de-emphasizing or terminating certain programs[32] Product Pipelines and Clinical Data The company's pipeline features MultiTAA T cell products showing clinical benefit in Phase I trials and peptide vaccines advancing through Phase II studies - The MultiTAA T cell platform offers advantages over CAR-T/TCR therapies, including being non-gene-modified, having a lower rate of adverse events (no CRS observed), and appearing to drive endogenous immune responses through "epitope spreading"[36][37][39] Phase I Clinical Trial Results (BCM) | Indication | Group | Patients Treated/Evaluable | Key Outcomes | Response Duration | | :--- | :--- | :--- | :--- | :--- | | Lymphoma | Active Disease | 15 | 6 Complete Responses (CR), 3 Stable Disease | 5 months to >5 years (ongoing CRs) | | Lymphoma | Adjuvant | 17 | 15 in continuing CR | 3 to >48 months | | AML/MDS | Active Disease | 6 | 1 CR, 1 Partial Response, 2 Disease Stabilization | 7 to 13 months | | AML/MDS | Adjuvant | 11 (evaluable) | 9 in continuing CR | 6 weeks to 2.5 years | | Multiple Myeloma | Active Disease | 8 (evaluable) | 1 CR, 3 Partial Responses | 6 to 29 months | | Multiple Myeloma | Adjuvant | 8 | 7 in continuing CR | 6 to 22 months | Peptide Vaccine Development Status | Product/Candidate | Description | Application | Status | | :--- | :--- | :--- | :--- | | TPIV100/110 | Peptide Vaccine | Treatment of HER2/neu+ Breast Cancer | Phase I completed; Phase I(b) & I/II to start in 2019 | | TPIV200 | Peptide Vaccine | Treatment of Folate Receptor Alpha+ Breast and Ovarian Cancer | Phase I completed; Multiple Phase II trials ongoing | | PolyStart™ | Nucleic acid expression tech | Broad Application to "Prime"-and-"Boost" | Preclinical | Key Agreements and Intellectual Property The company's operations heavily rely on licensed intellectual property, primarily from BCM for MultiTAA technology and Mayo Foundation for peptide vaccines - Entered an exclusive license agreement with BCM for MultiTAA technology, involving an initial equity issuance, potential milestone payments up to $64.85 million, and tiered royalties ranging from 0.65% to 5.0% on net sales[66][67] - A Sponsored Research Agreement (SRA) with BCM was established to support ongoing research, with the company committed to paying BCM up to $256,272 for the first two years[73] - Exclusively licensed TPIV100/110 (HER2/neu) and TPIV200 (Folate Receptor Alpha) vaccine technologies from the Mayo Foundation, including upfront payments of $300,000 and $350,000 respectively, plus future milestones and royalties[85][91][95] - The company owns issued U.S. patents for its PolyStart™ technology, providing protection until approximately March 2035[102] Manufacturing, Competition, and Regulation The company relies on third-party manufacturing, faces intense competition in immuno-oncology, and operates under extensive government regulation throughout the product lifecycle - The company relies on third-party contractors for all manufacturing, with BCM's GMP facility being the current sole manufacturer for MultiTAA-specific T cells for clinical trials[109][112] - Faces intense competition from major pharmaceutical and biotechnology companies with greater resources, including Juno Therapeutics/Celgene/Bristol Myers Squibb, Kite Pharma/Gilead, and Novartis in the cell therapy space[118] - Product development is subject to a lengthy, expensive, and uncertain regulatory review process by the FDA and other global authorities, including preclinical testing and three phases of clinical trials before a Biologics License Application (BLA) can be submitted[124][125] - The company may seek Fast Track Designation and Accelerated Approval for its product candidates to expedite development and review for serious conditions with unmet medical needs[132][135] - As of December 31, 2018, the company had 11 full-time employees[178] Risk Factors The company faces significant risks including operating losses, financing needs, reliance on key personnel and licensed IP, clinical trial uncertainties, and complex regulatory processes Risks Related to Business and Intellectual Property The company faces risks from accumulated deficits, reliance on key personnel and BCM, uncertain clinical development, complex third-party manufacturing, and intellectual property vulnerabilities - The company is a development-stage company with a history of operating losses and an accumulated deficit of approximately $306.1 million as of December 31, 2018[186] - Success is highly dependent on key personnel and the strategic relationship with Baylor College of Medicine (BCM), requiring additional agreements for future clinical trials and manufacturing[187][189][191] - Manufacturing is complex and reliant on third parties, with initial MultiTAA T cell manufacturing solely dependent on BCM's cGMP facility and future needs for pivotal trials requiring new capacity[224] - The manufacturing process relies on specialized equipment from limited vendors, including the G-Rex® cell culture device from Wilson Wolf, which could create supply risks and conflicts of interest[232][241] - The company's commercial success depends on protecting its licensed and owned intellectual property, primarily from BCM and the Mayo Foundation, which could be lost if obligations are not met or patents are challenged[256][259][270] Risks Related to Government Regulation The company faces extensive, costly, and uncertain government regulation, with no precedent for MultiTAA T cell therapy approval, and risks from evolving healthcare laws affecting pricing and market access - The company's products are subject to comprehensive and expensive regulation by the FDA and other authorities, a process that can take many years with an uncertain outcome[314] - There is no precedent for the successful commercialization of MultiTAA T cell therapy, which may create further challenges and delays in the regulatory approval pathway[315] - Even if regulatory approval is obtained, the company will be subject to ongoing obligations, including cGMP compliance, adverse event reporting, and potential post-marketing trials, with non-compliance risking fines or product withdrawal[317][323] - Changes in healthcare laws, including the ACA and other pricing reforms, could negatively impact the prices and reimbursement for the company's products, affecting commercial viability[325][326] - The company has received Orphan Drug Designation for TPIV200 in ovarian cancer, but there is no guarantee it will maintain this status or receive associated benefits like seven-year market exclusivity[331] Risks Related to our Securities Investment in the company's common stock carries significant risk due to price volatility, potential dilution from future equity sales and warrant/option exercises, and no anticipated cash dividends - The trading price of the company's common stock is subject to substantial fluctuation and volatility[339] - Future sales of equity securities are expected to fund operations, which will result in dilution to existing stockholders[346] - As of December 31, 2018, there were outstanding warrants to purchase approximately 23.0 million shares and options to purchase 4.1 million shares, which, if exercised, could cause significant dilution and potentially depress the stock price[347] - The company does not anticipate paying any cash dividends in the foreseeable future[349] Unresolved Staff Comments The company reports no unresolved staff comments - None[350] Properties The company leases all its office and laboratory facilities, including its Houston corporate headquarters and R&D space at Texas Medical Center - The company does not own any real estate and leases all its office and laboratory facilities[351] - In February 2019, the corporate headquarters was relocated from Jacksonville, Florida to a leased office in Houston, Texas[352] - In January 2019, the company leased laboratory space at JLABS, located at the Texas Medical Center in Houston, for research and development activities[353] Legal Proceedings As of December 31, 2018, the company was not a party to any material legal proceedings - As of December 31, 2018, the company was not a party to any material legal proceedings[354] Mine Safety Disclosure This item is not applicable to the company - Not Applicable[355] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'MRKR', has 492 stockholders, does not pay dividends, and issued 65,000 unregistered shares to vendors in Q4 2018 - The company's common stock is listed on the Nasdaq Capital Market under the symbol "MRKR"[357] - No dividends have been declared or paid, and the company does not intend to pay cash dividends in the foreseeable future[358] - In Q4 2018, 65,000 shares of common stock were issued to vendors for services, exempt from registration under the Securities Act of 1933[359] Selected Financial Data As a smaller reporting company, Marker Therapeutics is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information under this item[360] Management's Discussion and Analysis of Financial Condition and Results of Operations This section details the company's financial condition and operations, highlighting the 2018 merger and $70 million financing, resulting in a $148.0 million net loss primarily due to a $116.0 million R&D charge, and ending 2018 with $61.7 million cash Recent Developments and Products Recent developments include the October 2018 merger and $70 million financing, expanding the pipeline with MultiTAA T cell products and peptide vaccines advancing in clinical trials - Completed a merger with Marker Cell Therapy, Inc. on October 17, 2018, and concurrently raised $70 million in a private placement[368][371] - Following the merger and financing, pro forma ownership on a fully diluted basis was approximately 27.5% for former Marker Cell stockholders, 27.5% for pre-merger company stockholders, and 45% for private placement stockholders[372] - The company is advancing two MultiTAA T cell products: MAPP (autologous for lymphoma, MM) and LAPP (allogeneic for AML, MDS), both in Phase 1 trials[375] - The TPIV200 (Folate Receptor Alpha) vaccine program includes a company-sponsored Phase II trial in ovarian cancer and a DoD-funded Phase II trial in triple-negative breast cancer[387][392] Results of Operations The company reported a $148.0 million net loss in 2018, up from $11.0 million in 2017, primarily due to a $116.0 million non-cash R&D charge from the merger and increased operating expenses Results of Operations (in thousands, except per share data) | | 2018 | 2017 | Change (%) | | :--- | :--- | :--- | :--- | | Grant Income | $206 | $183 | 13% | | R&D - IP Acquired | $116,045 | $0 | N/A | | Research and Development | $7,953 | $5,251 | 51% | | General and Administrative | $24,380 | $6,412 | 280% | | Loss from Operations | ($148,172) | ($11,480) | 1191% | | Net Loss | ($147,958) | ($10,982) | 1247% | | Net Loss Per Share | ($7.75) | ($1.16) | 568% | - The $116.0 million expense for R&D - Intellectual Property Acquired represents the fair market value of assets acquired in the Merger, immediately expensed as the IP had not yet received regulatory approval[410] - The $18.0 million increase in G&A expenses was primarily due to $12.5 million in stock-based compensation, $4.0 million in merger-related legal and professional fees, and increases in headcount and investor relations costs[413][417] Liquidity and Capital Resources The company's cash and equivalents increased to $61.7 million by December 31, 2018, primarily from a $70 million private placement, with current reserves expected to fund operations through Q2 2020 Cash and Working Capital (in thousands) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $61,747 | $5,129 | | Working Capital | $59,193 | $3,658 | Summary of Cash Flows (in thousands) | | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash used in Operating Activities | ($14,480) | ($8,439) | | Net Cash used in Investing Activities | ($148) | $0 | | Net Cash provided by Financing Activities | $71,245 | $5,717 | - In October 2018, the company raised $70.0 million in gross proceeds from a private placement of common stock and warrants[424] - The company expects its cash as of December 31, 2018, will be sufficient to fund operations and capital requirements through at least the second quarter of 2020[431] - As of December 31, 2018, the company has federal Net Operating Loss (NOL) carryforwards of approximately $57.0 million to offset future taxable income[433] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Marker Therapeutics is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information under this item[436] Financial Statements This section incorporates by reference the company's audited consolidated financial statements and the independent registered public accounting firm's report - The Financial Statements are incorporated by reference to pages F-1 to F-27 of the report[437] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports that it has had no changes in, or disagreements with, its principal independent accountants - The company has had no changes in, or disagreements with its principal independent accountants[438] Controls and Procedures Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with Marcum LLP issuing an unqualified attestation report - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[439] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[440] - The independent registered public accounting firm, Marcum LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[441][447] Other Information This section details executive compensatory arrangements approved March 14, 2019, including a $181,250 cash bonus for the CEO, a $380,000 base salary increase, and a 2019 bonus program for top executives - On March 14, 2019, the Board approved a discretionary cash bonus of $181,250 for President and CEO Peter Hoang for 2018 performance[455] - Mr. Hoang's employment agreement was amended, increasing his annual base salary to $380,000 effective January 1, 2019[457][459] - A prior stock option grant to Mr. Hoang for 1,359,855 shares, which had vested immediately, was amended to add a four-year monthly vesting schedule through September 2022[456] - A 2019 bonus program was approved for top executives, with target bonuses of up to 50% of base salary for the CEO, 40% for the CFO, and 35% for the CAO, based on specific corporate objectives[458] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance will be incorporated by reference from the company's definitive proxy statement, and a Code of Ethics is available online - Information required by this item will be incorporated by reference from the company's upcoming Proxy Statement[464] - The company has adopted a Code of Ethics and Business Conduct, available on its website[465] Executive Compensation The information required for this item, including the Compensation Discussion and Analysis, will be incorporated by reference from the company's definitive proxy statement - Information required by this item will be incorporated by reference from the company's upcoming Proxy Statement[466] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item, including details on security ownership and equity compensation plans, will be incorporated by reference from the company's definitive proxy statement - Information required by this item will be incorporated by reference from the company's upcoming Proxy Statement[467] Certain Relationships and Related Transactions and Director Independence The information required for this item, including details on related party transactions and director independence, will be incorporated by reference from the company's definitive proxy statement - Information required by this item will be incorporated by reference from the company's upcoming Proxy Statement[469] Principal Accounting Fees and Services The information required for this item, including details on independent auditors' fees and services, will be incorporated by reference from the company's definitive proxy statement - Information required by this item will be incorporated by reference from the company's upcoming Proxy Statement[470] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including financial statements, auditor reports, and an extensive exhibit index of agreements and corporate governance documents - This section lists the financial statements, financial statement schedules (if applicable), and all exhibits filed with the report[473] - An exhibit index is provided, listing material contracts, corporate governance documents, and other required filings[474][616] Form 10-K Summary The company reports no summary for this item - None[477] Financial Statements Consolidated Balance Sheets As of December 31, 2018, total assets were $62.1 million and stockholders' equity was $59.3 million, a significant increase from 2017 primarily due to 2018 financing and merger activities Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,747 | $5,129 | | Total current assets | $61,997 | $5,180 | | Total Assets | $62,144 | $5,180 | | Liabilities & Equity | | | | Total current liabilities | $2,804 | $1,522 | | Total Liabilities | $2,804 | $1,522 | | Total Stockholders' Equity | $59,341 | $3,658 | | Total Liabilities and Stockholders' Equity | $62,144 | $5,180 | Consolidated Statements of Operations For 2018, the company reported a net loss of $148.0 million (or $7.75 per share), significantly higher than 2017, mainly due to a $116.0 million non-cash R&D charge from the merger Consolidated Statement of Operations Data (in thousands, except per share data) | | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | | :--- | :--- | :--- | | Grant income | $206 | $183 | | R&D - intellectual property acquired | $116,045 | $0 | | Research and development | $7,953 | $5,251 | | General and administrative | $24,380 | $6,412 | | Loss from operations | ($148,172) | ($11,480) | | Net loss | ($147,958) | ($10,982) | | Net loss per share, Basic and Diluted | ($7.75) | ($1.16) | Consolidated Statements of Cash Flows Net cash used in operating activities was $14.5 million in 2018, while financing activities provided $71.2 million, leading to a year-end cash balance of $61.7 million Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,480) | ($8,439) | | Net cash used in investing activities | ($148) | $0 | | Net cash provided by financing activities | $71,245 | $5,717 | | Net increase (decrease) in cash | $56,617 | ($2,722) | | Cash at end of year | $61,747 | $5,129 |