Greenwich LifeSciences(GLSI) - 2021 Q4 - Annual Report

Business and Risk Overview This section provides an overview of Greenwich LifeSciences' core business, its lead product candidate GP2, clinical development progress, market strategy, intellectual property, and a comprehensive analysis of associated risks Business Greenwich LifeSciences is a clinical-stage biopharmaceutical company developing GP2 immunotherapy for breast cancer recurrence prevention, planning a pivotal Phase III trial Product Candidate and Technology The company's sole product candidate, GP2, is a HER2/neu-derived peptide immunotherapy (GLSI-100) for breast cancer recurrence, relying on a single GM-CSF manufacturer - The lead product candidate, GP2, is a peptide from the HER2/neu protein, expressed in 75% of breast cancers, forming GLSI-100 when combined with GM-CSF[31] - GP2 is administered via 11 intradermal injections over years 2-4 post-surgery, following the first year of Herceptin treatment[41] - The company relies on a single manufacturer for the supply of GM-CSF, a critical component of GLSI-100 immunotherapy[34] Clinical Trials and Data Four clinical trials of GP2 have treated 146 patients without serious adverse events, leading to a planned pivotal Phase III trial (Flamingo-01) based on promising Phase IIb results Clinical Trial Status | Clinical Trial | Status | |---|---| | GP2 Phase III Clinical Trial – Flamingo-01 | Planned | | GP2 Phase IIb Clinical Trial | Trial Completed | | GP2 Phase I Clinical Trial — Combination with AE37 | Trial Completed | | GP2 Phase I Clinical Trial — Combination with Trastuzumab | Trial Completed | | First GP2 Phase I Clinical Trial | Trial Completed | - In the Phase IIb trial, HER2/neu 3+ patients treated with GLSI-100 showed a 0% recurrence rate after 5 years, compared to an 11% recurrence rate in the placebo group (p=0.0338)[51][55] - The planned Phase III trial, Flamingo-01, will evaluate GLSI-100 in high-risk HER2/neu positive breast cancer patients post-standard therapy[58][59] Market, Competition, and Strategy The company targets an initial U.S. market of 6% of breast cancer patients, faces intense competition, and plans to advance GP2 through Phase III, seeking global approvals and partnerships - The estimated U.S. market for GP2's initial indication comprises approximately 6% of breast cancer patients undergoing surgery[60] - Key competitors include Genentech/Roche, Puma, Daiichi Sankyo, and Merck, offering products like Herceptin, Perjeta, Kadcyla, Nerlynx, Enhertu, and Keytruda[62][63] - The company's strategy involves advancing GP2 into a Phase III trial, seeking global registration, and pursuing strategic collaborations for funding and commercialization[81] Intellectual Property and Regulation The company's IP relies on an exclusive HJF license for GP2 patents (2026-2032), operating under strict FDA and global regulations for clinical trials and BLA submission - The company holds an exclusive worldwide license from HJF for GP2 patents, requiring annual fees, milestone payments up to $5.7 million, and 2.5-5% royalties on sales[71] - Licensed patents protect GP2 from 2026 through 2032 in major markets, with plans for 12 years of market exclusivity as a biologic in the U.S[77][81] - Drug development is heavily regulated by the FDA, requiring successful preclinical studies and phased clinical trials (Phase 1, 2, 3) before BLA submission[84][88][91] Risk Factors The company faces significant risks including substantial financial losses, high capital needs, clinical development uncertainties, regulatory approval challenges, third-party dependencies, intense competition, and internal control weaknesses - Financial Risk: The company has a history of substantial losses, including $4.6 million in 2021, with an accumulated deficit of $33.6 million, requiring significant additional funding (estimated >$30 million for Phase III) to continue operations[123][128] - Clinical & Regulatory Risk: Success depends on lengthy, expensive clinical trials with no guarantee of regulatory approval from the FDA or other authorities[149][160] - Dependency Risk: The company relies on third parties for manufacturing its product candidate and GM-CSF, and its platform is based on an exclusive HJF license that could be terminated if obligations are not met[174][178][189] - Ownership & Control Risk: As of March 2022, insiders beneficially owned approximately 70% of the company's stock, granting them effective control over stockholder matters[295] - Internal Control Risk: A material weakness in internal control over financial reporting was identified due to inadequate segregation of duties, potentially affecting financial reporting accuracy[312] Financial Performance and Condition This section provides management's discussion and analysis of the company's financial condition and results of operations, including detailed financial statements and disclosures on internal controls Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The company reported no revenue and a $4.6 million net loss in 2021, driven by a 237% increase in R&D expenses, holding $27.2 million cash but requiring future capital for full development MD&A Financial Highlights | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Loss | $4.6 million | $1.9 million | | Research & Development Expenses | $3.56 million | $1.06 million | | General & Administrative Expenses | $1.04 million | $0.81 million | - The 237% increase in R&D expenses was primarily due to costs for planned Phase III clinical trial preparations[327] - As of December 31, 2021, the company's cash balance was $27.2 million, down from $28.7 million at the end of 2020[330] - Net cash used in operating activities increased to $4.3 million in 2021 from $1.2 million in 2020, reflecting increased clinical trial preparation spending[331] Financial Statements The audited financial statements for 2021 and 2020 show the company's pre-revenue status, with $27.2 million in cash assets and a $4.6 million net loss, detailed further in notes regarding license obligations and a suspended stock repurchase program Balance Sheets As of December 31, 2021, the company reported $27.2 million in total assets, primarily cash, with minimal liabilities of $385,172 and stockholders' equity of $26.8 million Balance Sheet Highlights | Balance Sheet Highlights | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash | $27,204,269 | $28,660,375 | | Total Assets | $27,216,884 | $28,676,602 | | Total Liabilities | $385,172 | $1,045,492 | | Total Stockholders' Equity | $26,831,712 | $27,631,110 | Statements of Operations For fiscal year 2021, the company reported no revenue and a net loss of $4,570,576, or ($0.35) per share, reflecting a significant increase in loss due to higher operating expenses Statements of Operations Summary | Statement of Operations | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | Research and Development | $3,559,515 | $1,057,606 | | General and Administrative | $1,038,428 | $806,188 | | Net Loss | ($4,570,576) | ($1,862,962) | | Net Loss Per Share | ($0.35) | ($0.20) | Notes to Financial Statements Notes disclose $434,732 in HJF license payments, $8.8 million in federal NOL carryforwards, and a $10 million stock repurchase program initiated and then suspended in early 2022 after $5.5 million in buybacks - The company paid HJF an aggregate of $434,732 in July 2021 for annual maintenance fees and patent expense reimbursements under its exclusive license agreement[457] - As of December 31, 2021, the company had federal net operating loss (NOL) carryforwards of approximately $8.8 million available to offset future taxable income[453] - In early 2022, the company initiated a $10 million stock repurchase program, repurchased approximately 269,828 shares for about $5.5 million, and then suspended the program indefinitely on March 15, 2022[475][476] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 31, 2021, due to a material weakness in internal control over financial reporting from inadequate segregation of duties - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[347] - A material weakness was identified in internal control over financial reporting due to inadequate segregation of duties from limited personnel and insufficient written policies[347][349] Corporate Governance and Ownership This section outlines the company's corporate governance structure, including its directors, executive compensation, and the concentrated nature of its security ownership Directors, Executive Officers, and Corporate Governance The company's leadership includes CEO Snehal Patel and Chairman David McWilliams, with separate roles, three independent directors on Audit and Compensation committees, and a Code of Business Conduct and Ethics - The company's leadership includes Snehal Patel as CEO & CFO, F. Joseph Daugherty as CMO, and David McWilliams as Chairman of the Board[357] - The Board has three independent directors (David McWilliams, Eric Rothe, Kenneth Hallock) who comprise the Audit and Compensation committees[373][374][400] - The company has separated the roles of Chairman of the Board and Chief Executive Officer[367] Executive Compensation In 2021, CEO Snehal Patel's total compensation was approximately $1.42 million, comprising salary, bonus, and stock awards, while non-employee directors received stock awards Executive Compensation Summary | Named Executive Officer | Year | Salary | Bonus | Stock Awards | Total Compensation | | :--- | :--- | :--- | :--- | :--- | :--- | | Snehal Patel, CEO | 2021 | $450,000 | $475,000 | $491,589 | $1,416,589 | | Snehal Patel, CEO | 2020 | $114,966 | $392,516 | $491,589 | $999,071 | - CEO Snehal Patel's employment agreement provides for a base salary of $450,000 and eligibility for an annual bonus of up to 50% of his base salary[386] - Non-employee directors received compensation in the form of stock awards, with shares vesting monthly over a 36-month period[384] Security Ownership As of March 21, 2022, the company's ownership is highly concentrated, with directors and executive officers, including CEO Snehal Patel, beneficially owning 70.26% of common stock, granting them effective control Beneficial Ownership Summary | Name of Beneficial Owner | Percentage of Common Stock Beneficially Owned | | :--- | :--- | | Snehal Patel (CEO) | 59.48% | | All current named executive officers and directors as a group (5 persons) | 70.26% |