Panbela Therapeutics(PBLA) - 2022 Q4 - Annual Report

PART I Business Panbela Therapeutics is a clinical-stage biopharmaceutical company focused on developing therapeutics for urgent unmet medical needs, primarily in oncology, with lead assets targeting the polyamine metabolic pathway - On June 15, 2022, Panbela acquired Cancer Prevention Pharmaceuticals, Inc. (CPP), expanding its therapeutic pipeline, with consideration including common stock, options, warrants, and up to $60 million in contingent milestone payments[23] - The company's lead assets are ivospemin (SBP-101) and Flynpovi (eflornithine and sulindac), which target the polyamine pathway to suppress tumor growth and modulate the immune system[26] - Ivospemin has received Fast Track and Orphan Drug designations in the U.S. for pancreatic cancer, and Orphan Drug designation in Europe[27] - Flynpovi has received Fast Track and Orphan Drug designations for Familial Adenomatous Polyposis (FAP) in both the U.S. and Europe[30] - The company relies on third-party manufacturers for its product candidates and does not own or operate any manufacturing facilities[150] Clinical Trials Overview The company is actively enrolling patients in the ASPIRE trial for ivospemin in metastatic pancreatic cancer and planning a Phase III registration trial for Flynpovi in FAP, alongside supporting various investigator-initiated trials - The ASPIRE trial is a randomized, double-blind, placebo-controlled study of ivospemin combined with gemcitabine and nab-paclitaxel for previously untreated metastatic pancreatic cancer, enrolling 600 subjects globally with an interim analysis expected in early 2024[33][34] - A Phase III registration trial for Flynpovi in Familial Adenomatous Polyposis (FAP) is being designed with a North American partner and is scheduled to begin in the second half of 2023, fully funded by the partner[28][42] - The PACES trial, a Phase III study funded by the NCI, is evaluating Flynpovi to prevent the recurrence of high-risk adenomas and colorectal cancers in colon cancer survivors[41] - Multiple trials are evaluating single-agent eflornithine for indications including relapsed refractory neuroblastoma, STK11 mutant non-small cell lung cancer, and recent-onset Type 1 diabetes[43] Disease Background and Market Opportunity The company targets several diseases with significant unmet medical needs, including pancreatic cancer, Familial Adenomatous Polyposis (FAP), ovarian cancer, colorectal cancer, and neuroblastoma - Pancreatic Ductal Adenocarcinoma (PDA) is a major unmet medical need, with median overall survival for untreated metastatic patients ranging from 8.5 to 11.1 months with standard chemotherapy regimens[44] - Familial Adenomatous Polyposis (FAP) is a rare genetic condition affecting approximately 1 in 10,000 individuals in the U.S., leading to a nearly 100% lifetime risk of colorectal cancer by age 40 if untreated, with no currently approved pharmacotherapeutic treatments[52][57] - Ovarian cancer is the fifth leading cause of cancer deaths among women, with a five-year survival rate of approximately 29% for metastatic disease[58] Proprietary Technology and Mechanism of Action The company's therapeutic strategy involves resetting the dysregulated polyamine pathway, which is critical for cancer cell proliferation and immune evasion - The company's assets target the polyamine metabolic pathway, which is dysregulated in many cancers and is essential for cell proliferation and immune modulation[68][69][70] - Ivospemin is a polyamine analogue designed to be taken up by pancreatic cancer cells, disrupting their polyamine balance and inducing programmed cell death (apoptosis)[72][73] - Flynpovi offers a dual-mechanism approach: eflornithine irreversibly inhibits ornithine decarboxylase (ODC) to block new polyamine synthesis, while sulindac increases polyamine catabolism and export[76][82][86] Government Regulation The company's products are subject to extensive regulation by the FDA in the U.S. and similar agencies abroad, covering all stages from research and development to post-approval marketing - Pharmaceutical product development is a multi-year process requiring preclinical tests and adequate and well-controlled clinical trials (typically Phase I, II, and III) to establish safety and effectiveness before FDA approval[155][160] - The company has received Fast Track Designation for ivospemin and Flynpovi, which facilitates development and expedites the review of drugs for serious conditions with unmet medical needs[134][168] - The company has obtained U.S. and European Orphan Drug Status for its key product candidates, which provides incentives like tax credits, fee waivers, and a seven-year period of U.S. market exclusivity upon approval[131][132][133] Risk Factors The company faces significant risks, including a history of negative cash flow, substantial doubt about its ability to continue as a "going concern," and uncertainties in clinical development and third-party reliance - The company is a pre-revenue entity with a history of negative operating cash flow, and its auditors have expressed substantial doubt about its ability to continue as a "going concern"[200][202] - Additional capital is required to fund operations beyond the third quarter of 2023, and failure to secure financing could force the company to delay or terminate development programs[205][268] - The integration of the recently acquired CPP may be more difficult, costly, or time-consuming than expected, and the anticipated benefits may not be fully realized[223] - Clinical trials are expensive, lengthy, and their outcomes are highly uncertain, with unfavorable results potentially delaying or preventing regulatory approval[227] - The company relies on third-party CROs to conduct clinical trials and third-party suppliers for manufacturing, which limits direct control over timing, cost, and quality[235][236] Properties The company does not own or lease any real property, conducting its business functions on a distributed basis with employees working from home - The company does not lease or own any real property and all employees currently work from their homes[273] Legal Proceedings As of the report date, Panbela Therapeutics, Inc. is not a party to any material legal proceedings - The company is not currently party to any material legal proceedings[274] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is listed on the Nasdaq Capital Market under the symbol "PBLA", with 277 holders of record as of March 13, 2023, and no anticipated cash dividends in the foreseeable future - Common stock is listed on the Nasdaq Capital Market under the symbol "PBLA"[277] - The company has never paid cash dividends and does not plan to in the foreseeable future[278] Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2022, Panbela reported a net loss of $34.9 million, primarily due to a $17.7 million non-cash write-off of in-process research and development (IPR&D) and increased clinical trial costs, leading to a significant decrease in cash position and substantial doubt about its going concern ability Operating Expenses and Net Loss | | Year Ended December 31, | | Percent Change | | :--- | :--- | :--- | :--- | | | 2022 (in thousands) | 2021 (in thousands) | | | General and administrative | $6,044 | $4,587 | 31.8% | | Research and development | $28,049 | $5,423 | 417.2% | | Total operating expenses | $34,093 | $10,010 | 240.6% | | Net Loss | ($34,933) | ($10,135) | 244.7% | - The significant increase in R&D expenses in 2022 was primarily due to a one-time, non-cash write-off of approximately $17.7 million for In-Process Research and Development (IPR&D) acquired from CPP, along with increased costs for the ivospemin randomized trial[324] Liquidity and Capital Resources | Liquidity and Capital Resources | December 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,285 | $11,867 | | Working capital | ($6,056) | $9,619 | - Net cash used in operating activities increased to $15.3 million in 2022 from $7.2 million in 2021, reflecting higher net losses and changes in operating assets and liabilities[328][330] - Subsequent to year-end, in January 2023, the company raised gross proceeds of approximately $15.0 million from a public offering and $1.6 million from its ATM facility, with these funds expected to support operations into the third quarter of 2023[333][334] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes identified - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective[353] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[357] PART III Directors, Executive Officers and Corporate Governance The company's executive officers are Jennifer K. Simpson, Ph.D., President and CEO, and Susan Horvath, VP and CFO, with a classified Board of Directors having extensive industry experience and an adopted code of ethics - The executive leadership consists of Jennifer K. Simpson, Ph.D., as President and Chief Executive Officer, and Susan Horvath as Vice President and Chief Financial Officer[362][363] - The Board of Directors is divided into three classes, with directors typically serving three-year terms[364] - The company has adopted a code of ethics and business conduct applicable to all directors, officers, and employees[373] Executive Compensation For fiscal year 2022, CEO Jennifer K. Simpson's total compensation was $694,324 and CFO Susan Horvath's was $423,459, with cash incentive bonuses approved based on performance milestones Summary Compensation Table | Name and Principal Positions | Year | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Jennifer K. Simpson | 2022 | 506,000 | 188,324 | 694,324 | | President and Chief Executive Officer | 2021 | 476,609 | 182,422 | 1,196,733 | | Susan Horvath | 2022 | 320,000 | 103,459 | 423,459 | | Chief Financial Officer and Vice President of Finance | 2021 | 302,200 | 99,620 | 557,078 | - No new equity awards were granted to named executive officers during fiscal 2022[379] - For 2022 performance, the Compensation Committee approved cash bonus payments at 74.44% of target for the CEO and 80.83% of target for the CFO, paid in the first quarter of 2023[384] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 31, 2022, 100,556 shares were underlying outstanding stock options, with 50,511 shares remaining available for future issuance, and Lind Global Fund II LP was the only beneficial owner of 5% or more of the company's stock Equity Compensation Plan Information | Plan Category | Securities to Be Issued Upon Exercise | Weighted-Average Exercise Price ($) | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 100,556 | $145.50 | 50,511 | - As of March 13, 2023, Lind Global Fund II LP was the only reported beneficial owner of more than 5% of the company's common stock, with ownership of 6.0%[400][402] - All directors and current executive officers as a group (8 persons) beneficially owned 130,187 shares, representing less than 1% of outstanding shares as of March 13, 2023[400][402] Certain Relationships and Related Transactions, and Director Independence The company disclosed a $350,000 separation agreement with Jeffrey E. Jacob and a consulting agreement with former Chief Medical Officer Dr. Suzanne Gagnon for approximately $72,000 in 2022, with the Board determining four members as independent directors - Following the CPP acquisition, a separation agreement was made with Jeffrey E. Jacob (now a Panbela director) for a total payment of $350,000, due upon a material financing or by June 15, 2024[403] - The company has a consulting contract with former Chief Medical Officer Dr. Suzanne Gagnon, under which she was paid approximately $72,000 in 2022[405] - The Board of Directors has determined that Messrs. Donovan, Fratamico, Mathiesen, and Schemel are "independent directors" under Nasdaq rules[412] Principal Accounting Fees and Services Cherry Bekaert LLP served as the independent registered public accounting firm for fiscal years 2022 and 2021, with total fees billed at $130,375 and $107,850 respectively, all pre-approved by the Audit Committee Audit Fees and Services | | Year Ended December 31, 2022 ($) | Year Ended December 31, 2021 ($) | | :--- | :--- | :--- | | Audit Fees | $124,800 | $105,500 | | Audit-Related Fees | $5,575 | $2,350 | | Total | $130,375 | $107,850 | PART IV Exhibits, Financial Statements Schedules This section lists the financial statements, schedules, and exhibits filed as part of the annual report, including the Merger Agreement with CPP, corporate governance documents, and various agreements Financial Statements Report of Independent Registered Public Accounting Firm The independent auditor, Cherry Bekaert LLP, issued an opinion on the fair presentation of the consolidated financial statements but highlighted substantial doubt about the company's ability to continue as a going concern and identified the CPP asset purchase accounting as a critical audit matter - The auditor's report expresses substantial doubt about the Company's ability to continue as a going concern, citing recurring losses and negative cash flows from operations[427] - The accounting for the acquisition of Cancer Prevention Pharmaceuticals, Inc. (CPP) was identified as a Critical Audit Matter, particularly the judgment involved in classifying it as an asset acquisition and valuing the in-process research and development (IPR&D)[431][432][433] Consolidated Financial Statements The consolidated financial statements for the year ended December 31, 2022, show a significant deterioration in financial position, with total assets decreasing to $5.0 million and a stockholders' deficit of $8.0 million, alongside a net loss of $34.9 million Consolidated Balance Sheet Data | Consolidated Balance Sheet Data (in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,285 | $11,867 | | Total current assets | $1,777 | $12,279 | | Total assets | $4,978 | $12,872 | | Total current liabilities | $7,833 | $2,660 | | Total liabilities | $13,027 | $2,660 | | Total stockholders' (deficit) equity | ($8,049) | $10,212 | Consolidated Statement of Operations Data | Consolidated Statement of Operations Data (in thousands) | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Operating loss | ($34,093) | ($10,010) | | Net loss | ($34,933) | ($10,135) | | Basic and diluted net loss per share | ($67.91) | ($34.64) | Notes to Consolidated Financial Statements The notes provide critical details, including the substantial doubt about the company's going concern ability, the accounting for the CPP acquisition which resulted in a $17.7 million R&D expense, outstanding debt of approximately $6.4 million to Sucampo GmbH, and equity transactions including a 1-for-40 reverse stock split - The acquisition of CPP was accounted for as an asset acquisition, with the purchase consideration allocated to the assets acquired, and the in-process research and development (IPR&D) asset of $17.7 million was immediately expensed upon closing[493][496] - As of December 31, 2022, the company had approximately $6.4 million in principal and interest outstanding under a promissory note to Sucampo GmbH and $0.7 million to Tillotts Pharma AG[497][498] - Effective January 13, 2023, the company implemented a 1-for-40 reverse stock split of its common stock, with all share and per-share data in the report retroactively adjusted[452][512] - The company has license agreements with the University of Florida Research Foundation for ivospemin and the University of Arizona for Flynpovi, which include obligations for royalties and potential milestone payments[500][502][503]