Aptose Biosciences(APTO) - 2022 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements 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 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 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 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 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 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][31] - 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] - 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][89][90] - The clinical program for APTO-253, a MYC oncogene inhibitor, was discontinued in December 2021 to prioritize other pipeline assets[91] Program Updates 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] - 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] - 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][109] - 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][122] Liquidity and Capital Resources 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] - In October 2022, a new $200 million base shelf prospectus was filed and declared effective, replacing the expired 2020 ATM facility[127][128] 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 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] 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] Critical Accounting Policies 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] - 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] Qualitative and Quantitative Disclosures about Market Risk 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] Controls and Procedures 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] - 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] PART II—OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Exhibits 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] 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]