PART
1
FORWARD
LOOKING STATEMENTS
This
annual report on Form 10-K (“Form 10-K”) includes statements that are, or may be deemed, “forward-looking statements.”
In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms
“believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,”
“may,” “could,” “might,” “will,” “should,” “approximately”
or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements
contain these words. They appear in a number of places throughout this Form 10-K and include statements regarding our intentions,
beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned discovery
and development of drug candidates, the strength and breadth of our intellectual property, our ongoing and planned preclinical
studies and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals
for our product candidates, the degree of clinical utility of our product candidates, particularly in specific patient populations,
expectations regarding clinical trial data, our results of operations, financial condition, liquidity, prospects, growth and strategies,
the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing
needs and sources of financing, the industry in which we operate and the trends that may affect the industry or us.
By
their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics,
and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the
future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each
forward-looking statement contained in this Form 10-K, we caution you that forward-looking statements are not guarantees of future
performance and that our actual results of operations, financial condition and liquidity, and the development of the industry
in which we operate may differ materially from the forward-looking statements contained in this Form 10-K. In addition, even if
our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent
with the forward-looking statements contained in this Form 10-K, they may not be predictive of results or developments in future
periods.
Some
of the factors that we believe could cause actual results to differ from those anticipated or predicted include:
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the
success and timing of our clinical trials, including patient accrual;
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our
ability to obtain and maintain regulatory approval and/or reimbursement of our product candidates for marketing;
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our
ability to obtain the appropriate labeling of our products under any regulatory approval;
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our
plans to develop and commercialize our products;
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the
successful development and implementation of our sales and marketing campaigns;
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the change of key
scientific or management personnel;
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the
size and growth of the potential markets for our product candidates and our ability to serve those markets;
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our
ability to successfully compete in the potential markets for our product candidates, if commercialized;
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regulatory
developments in the United States and foreign countries;
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the
rate and degree of market acceptance of any of our product candidates;
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new
products, product candidates or new uses for existing products or technologies introduced or announced by our competitors
and the timing of these introductions or announcements;
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market
conditions in the pharmaceutical and biotechnology sectors;
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our
available cash;
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the
accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
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our
ability to obtain additional funding;
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our
ability to obtain and maintain intellectual property protection for our product candidates;
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the
success and timing of our preclinical studies including IND enabling studies;
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the
ability of our product candidates to successfully perform in clinical trials;
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our
ability to obtain and maintain approval of our product candidates for trial initiation;
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our
ability to manufacture and the performance of third-party manufacturers;
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the
performance of our clinical research organizations, clinical trial sponsors and clinical trial investigators; and
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our
ability to successfully implement our strategy.
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Any
forward-looking statements that we make in this Form 10-K speak only as of the date of such statement, and we undertake no obligation
to update such statements to reflect events or circumstances after the date of this Form 10-K. You should also read carefully
the factors described in the “Risk Factors” section of this Form 10-K to better understand the risks and uncertainties
inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that
the forward-looking statements in this Form 10-K will prove to be accurate.
This
Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys
and studies conducted by third-parties. Industry publications and third-party research, surveys and studies generally indicate
that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or
completeness of such information. While we believe these industry publications and third-party research, surveys and studies are
reliable, we have not independently verified such data.
We
qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking
statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
Item
1. Business.
General
Advaxis,
Inc. (“Advaxis” or the “Company”) is a late-stage biotechnology Company focused on the discovery, development
and commercialization of proprietary
Lm
Technology antigen delivery products based on a platform technology that utilizes
live attenuated
Listeria monocytogenes
(“
Lm
”) bioengineered to secrete antigen/adjuvant fusion proteins.
These
Lm
-based strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions
into a single immunotherapy by accessing and directing antigen presenting cells to stimulate anti-tumor T cell immunity, stimulate
and activate the immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the Tumor
Microenvironment (“TME”) to enable the T cells to eliminate tumors. The Company believes that
Lm
Technology
immunotherapies can complement and address significant unmet needs in the current oncology treatment landscape. Specifically,
their product candidates have the potential to optimize checkpoint performance, while having a generally well-tolerated safety
profile, and most of their product candidates are immediately available for treatment with a low cost of goods. The Company’s
passion for the clinical potential of
Lm
Technology is balanced by focus and fiscal discipline and driven towards increasing
shareholder value.
Advaxis
is focused on four franchises in various stages of clinical and pre-clinical development, which they believe will provide the
greatest opportunity to have a significant impact on patients and their families:
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Human
Papilloma Virus (“HPV”)-associated cancers
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Neoantigen
therapy
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Disease
focused hotspot / cancer antigen therapies
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Prostate
cancer
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All
four clinical franchises are anchored in the Company’s
Lm
Technology
TM
, a unique platform designed for
its ability to safely and effectively target various cancers in multiple ways. As an intracellular bacterium,
Lm
is an
effective vector for the presentation of antigens through both the Major Histocompatibility Complex (“MHC”) I and
II pathways, due to its active phagocytosis by Antigen Presenting Cells (“APCs”). Within the APCs,
Lm
produces
virulence factors which allow survival in the host cytosol and potently stimulate the immune system.
Through
a license from the University of Pennsylvania, Advaxis has exclusive access to a proprietary formulation of attenuated
Lm
called
Lm
Technology.
Lm
Technology optimizes this natural system, and one of the keys to the enhanced immunogenicity of
Lm
Technology is the
tLLO
– fusion protein, which is made up of tumor associated antigen (“TAA”)
fused to a highly immunogenic bacterial protein that triggers potent cellular immunity. The
tLLO
-fusion protein also helps
to reduce immune tolerance in the TME and promotes antigen spreading, thereby improving activity in the TME. Multiple copies of
the
tLLO
-fusion protein within each construct may increase antigen presentation and TME impact.
As
the field of immunotherapy continues to evolve, the flexibility of the
Lm
Technology platform has allowed Advaxis to develop
highly innovative products. To date,
Lm
Technology has demonstrated preclinical synergy with multiple checkpoint inhibitors,
co-stimulatory agents and radiation therapy, with clinical trials currently underway or planned in combination with Merck &
Co., Inc. (“Merck”), AstraZeneca PLC (“AstraZeneca”), and Bristol-Myers Squibb Company’s (“BMS”)
PD-1/PDL-1 inhibitors. The safety profile of all
Lm
Technology constructs seen to date has been predictable and manageable,
consisting mostly of mild to moderate flu-like symptoms that have been transient and associated with infusion.
The
Advaxis Corporate Strategy
The
Advaxis corporate strategy is to advance the
Lm
Technology platform and leverage its unique capabilities to design and
develop an array of cancer treatments. The Company and its collaborators are currently conducting or planning clinical studies
of
Lm
Technology immunotherapies in HPV-associated cancers (including cervical and head and neck), prostate cancer, non-small
cell lung cancers, and microsatellite stable colorectal cancer. Advaxis’ partners and collaborators include Amgen,
Inc. (“Amgen”), BMS, Merck, AstraZeneca, the Gynecological Oncology Group (“GOG”) Foundation, Inc. (now
a member of NRG Oncology), the European Network for Gynaecological Oncological Trial groups (“ENGOT”), the
Parker Institute for Cancer Immunotherapy, Baylor College of Medicine and the Prostate Cancer Foundation.
Moving
forward, the Company will continue to invest in its core clinical franchises and will also remain opportunistic in evaluating
Investigator Sponsored Trials (“ISTs”) as well as licensing opportunities. The
Lm
Technology platform is protected
by a range of patents, covering both product and process, some of which the Company believes can be maintained into 2037.
Lm
Technology
and the Immunotherapy Landscape
The
challenge of cancer immunotherapy has been to find the best overall balance between efficacy and side effects when mobilizing
the body’s immune system to fight against cancer. The development of immune checkpoint inhibitors was a significant
step forward, and brought with it impressive clinical activity in many different types of cancers, including melanoma and lung
cancer. However, a literature review published in
Pharmacy and Therapeutics
in 2016 noted that checkpoint inhibitor monotherapy
response rates are only in the 15-20% range, and rise to around 50% higher only in selected groups of patients with melanoma
or lung cancer. Therefore, for most cancer patients, there is room for improvement. Checkpoint inhibitors can expand existing
cancer fighting cells that may already be present in low numbers and support their activity against cancer cells, but if the right
cancer-fighting cells are not present, checkpoint inhibitors may not provide clinical benefit. Similarly, there are many mechanisms
of immune tolerance that are distinct from the checkpoints which, may also be blocking the immune system from fighting
cancer. Based on both pre-clinical and early clinical data, Advaxis believes that checkpoint inhibitors, when combined with treatments
such as
Lm
Technology, can have an amplified anti-tumor effect.
Lm
Technology incorporates several complementary
elements that include innate immune stimulation, potent generation of cancer-targeted T cells, ability to boost immunity
through multiple treatments, enhancing lymphocyte infiltration into tumors, reduction of non-checkpoint mediated immune
tolerance within the tumor microenvironment, and promotion of antigen spreading which may amplify the effects of treatment. These
results provide rationale for further testing of
Lm
Technology agents in combination with checkpoint inhibitors.
Traditional
cancer vaccines were another development within immunotherapy and have a history beginning over 30 years ago. Unfortunately, these
vaccines have largely been unsuccessful for a variety of potential reasons. These include poor selection of targets, imbalanced
antigen presentation by inclusion of certain immune enhancing agents (adjuvants), failure to consider the blocking actions of
immune tolerance, and choice of vaccine vectors. In some cases, patients may develop neutralizing antibodies, preventing further
treatments. In contrast to traditional cancer vaccines,
Lm
Technology takes advantage of a natural pathway in the immune
system that evolved to protect us against
Listeria
infections, that also happens to generate the same type of immunity
that is required when fighting cancer. The live but weakened (attenuated) bacteria stimulate a balanced concert of innate immune
triggers and present the tumor antigen target precisely where it needs to be to generate potent cancer fighting cells from within
the immune system itself. The multitude of accompanying signals serves to broadly mobilize most of the immune system in support
of fighting what seems to be a
Listeria
infection, and is then “re-directed” against cancer cell targets. Additionally,
the unique intracellular lifecycle of
Listeria
avoids the creation of neutralizing antibodies, thereby allowing for repeat
administration as a chronic therapy with a sustained enhancing of tumor antigen-specific T cell immunity.
More
recently, a new category of immunotherapies called Adoptive Cell Transfer (“CAR-Ts”, “TCRs”, “TILs”)
has provided further evidence of the benefits of providing an enhanced T cell presence to fight cancer. As published in the
Journal
of the American Medical Association
in November 2017, CAR-T has achieved dramatic results in liquid tumors, and can provoke
clinical responses when other treatments stop working. These cells are artificially engineered outside the body and early versions
have suffered from unanticipated side effects. The therapies are also limited in activity against a specific target, and have
a limited persistence within the patient. To date, CAR-Ts activity has been limited to liquid tumors and have shown potentially
meaningful toxicity concerns. Moreover, CAR-Ts are complex therapeutic products that are primarily manufactured and released for
each patient, leading to costly manufacturing and a number of treatments.
Looking
back on the last two decades, there have been promising technology advancements to harness and activate killer T cells against
cancers and every day more is learned about the interplay between immunity and cancer that can lead to improved treatments. However
there are still significant unmet needs in the immunotherapy landscape that Advaxis feels
Lm
Technology can address and
complement. Specifically,
Lm
Technology has the potential to optimize and expand checkpoint inhibitor activity in combination.
It also avoids many of the limitations of previous cancer vaccine attempts by tapping into the pathway reserved for defense against
Listeria
infection while incorporating the best cancer-targets science can identify, including neoantigens that result
from mutations in the cancer. To date,
Lm
Technology products have a generally well-tolerated safety profile, do not generate
neutralizing antibodies lending themselves to retreatments, and most of the products are immediately available for treatment without
the complication and expense of modifying a patient’s own cells in a laboratory.
Lm
Technology: An optimized
Listeria
-based antigen delivery system
Advaxis’
Listeria
-based immunotherapies are optimized for antigen delivery through a process of insertion of multiple copies of
the proprietary
tLLO
-fusion protein into each extrachromosomal protein expression and secretion plasmid that makes and
secretes the target protein right inside the patient’s antigen presenting cells to initiate and/or boost their immune response.
The
tLLO
-fusion protein approach was developed at the University of Pennsylvania as an improvement over insertion of a
single copy of the target gene, as an ACT-A (or other
Lm
peptide) fusion, within the bacterial genome for four key reasons:
1.
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Multiple
copies of the DNA in the plasmids per bacteria can result in larger amounts of
tLLO
- fusion protein being expressed
simultaneously, versus a single copy. This can improve antigen presentation and immunologic priming and increases
the number of T cells generated for a particular treatment.
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tLLO
expressed on plasmids (with or without a tumor target protein attached) has been shown to reduce numbers and immune suppressive
function of Tregs and MDSCs in the tumor microenvironment. Recently presented data demonstrates that Tregs are being
destroyed as soon as 5 days after the first
Lm
Technology treatment in animal models.
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3.
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The
extrachromosal DNA plasmids themselves also contain CPG sequence patterns that trigger TLR-9, which confers additional innate
immune stimulation beyond a listeria without the plasmids.
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4.
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The
multiple copies of bacterial DNA plasmids (up to 80-100 per bacteria) confers additional stimulation of the STING receptor
within APC’s which has been associated with enhancing anti-cancer immunity in patients.
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Through
a license from the University of Pennsylvania, Advaxis has exclusive access to this proprietary formulation of attenuated
Lm
which further enhances this nearly ideal natural system. Clinical application in the Company’s four franchise areas
is the core focus of current development efforts.
Clinical
Pipeline
Advaxis
is focused on the discovery, development and commercialization of proprietary
Lm
Technology antigen delivery products,
with the lead program for cervical cancer in Phase 3 development. The Company and its collaborators are currently conducting or
planning clinical studies of
Lm
Technology immunotherapies in four franchises:
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Human Papilloma
Virus (“HPV”)-associate cancers
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Neoantigen therapy
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Disease focused
hotspot / cancer antigen therapies
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Prostate cancer
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As
a late stage biotechnology company with no commercial products, Advaxis is aware of the need for fiscal responsibility, and is
focusing our investment into the four franchises listed above. Additionally, the company will continue to be opportunistic by
exploring ISTs, licensing and other external opportunities.
In
October of 2015, the Company received notification from the FDA that the INDs for axalimogene filolisbac were put on clinical
hold in response to its submission of a safety report to the FDA. The clinical hold also included the INDs for ADXS-PSA and ADXS-HER2.
Following discussions with the FDA and in accordance with their recommendations, the Company agreed to implement certain risk
mitigation measures, including revised trial protocol inclusion / exclusion criteria, post administration antibiotic treatment
and patient surveillance and monitoring measures. In December 2015, the FDA notified the Company that the hold had been lifted
with respect to its INDs.
Advaxis
Pipeline of Product Candidates
HPV
Related Cancers: Proof of Concept of
Lm
Technology
The
Company is developing a franchise in HPV-related cancers including both axalimogene filolisbac and ADXS-DUAL. Axalimogene filolisbac
is an
Lm
–based antigen delivery product directed against HPV and designed to target cells expressing HPV. ADXS-DUAL,
the Company’s second immunotherapy targeting HPV-associated cancers, builds on the learnings from the clinical development
of axalimogene filolisbac and incorporates an additional HPV target antigen into the
Lm
Technology vector. The company’s
HPV-related products are currently under investigation in two HPV-associated cancers: cervical cancer and head and neck cancer,
either as a monotherapy or in combination. Advaxis has also completed treatment in two Phase 2 studies of axalimogene filolisbac
for the treatment of anal cancer, and is evaluating the potential for collaborative external opportunities to further develop
this program.
Cervical
Cancer: axalimogene filolisbac and ADXS-DUAL
HPV
is the most common viral infection of the reproductive tract and is the cause of a range of conditions in both females and males.
In women, persistent infection with specific oncogenic types of HPV (most frequently alpha7 and alpha9 families) may lead to precancerous
lesions which, if untreated, may progress to cervical cancer. There are approximately 527,000 new cases of cervical cancer caused
by HPV worldwide every year, and 12,000 new cases in the U.S. alone, according to the World Health Organization (“WHO”)
Human Papillomavirus and Related Cancers in the World Summary Report 2017. There are approximately 4,250 deaths from cervical
cancer each year according to the National Institutes of Health. Current preventative HPV vaccines such as Gardasil
®
and Cervarix
®
cannot treat or protect the large population of adults already infected with the virus, leaving
several generations of women vulnerable. Furthermore, challenges with acceptance, accessibility, and compliance have resulted
in suboptimal vaccination rates, with approximately 50% of young women and 38% of young men being fully vaccinated in the United
States, according to statistics published by the Centers for Disease Control in 2017. Vaccination rates are even lower in other
countries around the world.
Current
treatments for metastatic cervical cancer can only extend life for about 6-8 months. Axalimogene filolisbac and ADXS-DUAL are
Lm
Technology immunotherapies designed to secrete the
tLLO
-E7 fusion protein to target HPV-positive tumors.
Axalimogene filolisbac
has received FDA orphan drug designation for invasive International Federation of Gynecology and Obstetrics (“FIGO”)
Stage II-IV cervical cancer, and has received Fast Track designation from the FDA for the treatment of high-risk locally
advanced cervical cancer. Axalimogene filolisbac has also been classified as an advanced-therapy medicinal product (“ATMP”)
for the treatment of cervical cancer by the European Medicines Agency’s (“EMA”) Committee for Advanced Therapies
(“CAT”). The CAT is the EMA’s committee responsible for assessing the quality, safety and efficacy of ATMPs.
The Company has completed the CAT certification procedure and the CAT has certified that the preclinical and quality information
have met the scientific and technical standards for a MAA.
Phase
2 Trial Results – axalimogene filolisbac
In
2014, the company completed a randomized Phase 2 clinical trial (
Lm
-LLO-E7-15) in 109 women with recurrent/refractory
cervical cancer. The final results were presented at the 2014 American Society of Clinical Oncology (“ASCO”) Annual
Meeting, and showed that 32% (35/109) of patients were alive at 12 months, 22% (24/109) of patients were Long-term Survivors (“LTS”)
alive greater than 18 months, and 18% (16/91) evaluable with adequate follow-up of patients were alive for more than 24 months.
Of the 109 patients treated in the trial, LTS included not only patients with tumor shrinkage but also patients who had
experienced stable disease or increased tumor burden. 17% (19/109) of the patients in the trial had recurrence of disease after
at least two prior treatments for their cervical cancer; these patients comprised 8% (2/24) of LTS. Among the LTS, 25% (3/12)
of patients had a baseline Eastern Cooperative Oncology Group (“ECOG”) performance status of 2, a patient population
that is often excluded from clinical trials. Furthermore, a 10% objective response rate (including 5 complete responses and 6
partial responses) and a disease control rate of 38% (42/109) were observed. The addition of cisplatin chemotherapy to axalimogene
filolisbac in this trial did not significantly improve overall survival or objective tumor response (
p
=0.9981).
In
this trial, 109 patients received 254 doses of axalimogene filolisbac. Axalimogene filolisbac was found to be well tolerated
with 38% (41/109) of patients experiencing mild to moderate Grade 1 or 2 transient adverse events associated with infusion; 1
patient experienced a Grade 3 Serious Adverse Events (“SAE”). All observed treatment-related adverse events either
self-resolved or responded readily to symptomatic treatment.
Based
on these results, the Gynecological Oncology Group (“GOG”) Foundation, Inc. (now a member of NRG Oncology), under
the sponsorship of the Cancer Therapy Evaluation Program (“CTEP”) of the National Cancer Institute (“NCI”),
conducted GOG-0265, an open-label, single arm Phase 2 trial of axalimogene filolisbac in persistent or recurrent cervical
cancer (patients must have received at least 1 prior chemotherapy regimen for the treatment of their recurrent/metastatic disease,
not including that administered as a component of primary treatment) at numerous clinical sites in the U.S. The trial was
a Simon 2-stage design, with the primary efficacy endpoint being 12-month survival, with the objective of the secondary efficacy
endpoints to evaluate progression-free survival, overall survival and objective tumor response. The primary safety endpoints were
to evaluate the number of patients with dose-limiting toxicities and the frequency and severity of adverse effects.
To evaluate the trial’s
primary endpoint of 12-month overall survival rate, the GOG’s protocol featured a prospectively-defined logistic
model-based calculation of the expected 12-month survival rate using key predictive factors significantly related to survival
and derived from 17 serially conducted GOG/NRG 2-stage studies of inactive agents in persistent/recurrent metastatic cervical
cancer (“PRmCC”) involving approximately 500 patients. This accumulated data by GOG used a consistent protocol design
and a similar data collection methodology resulting in a robust and homogeneous patient dataset for the per protocol analysis
of the primary endpoint. Per the trial protocol, this logistic model-based calculation was then used as a comparator for evaluating
the 12-month survival rate of axalimogene filolisbac observed in GOG-0265.
The
first stage of enrollment in GOG-0265 was successfully completed with 26 patients treated and met the predetermined safety and
efficacy criteria required to proceed into the second stage of patient enrollment. Clinical data from the first stage of GOG-0265
was presented at the American Gynecological & Obstetrical Society (“AGOS”) annual meeting on September 17, 2015.
Overall survival at 12 months was 38.5% (10/26) (the predefined criteria for 12-month survival in order to progress to Stage 2
was ≥20%), and, among patients who had received the full treatment regimen of 3 doses of axalimogene filolisbac, the 12-month
survival rate was 55.6% (10/18). The adverse events observed in the first stage of the trial have been consistent with
those reported in other clinical studies with axalimogene filolisbac.
Stage
2 of the trial began enrollment in February 2015 which included a protocol amendment to allow patients to continue to receive
repeat cycles of therapy until disease progression. Stage 2 enrollment was temporarily suspended with a clinical hold in October
2015 that resolved in mid-December 2015. Prior to re-initiating enrollment of a new cohort of Stage 2 patients, Advaxis and the
GOG Foundation/NRG Oncology examined the 12-month survival rate and safety data obtained from the 24 patients who had previously
enrolled in Stage 2. The Stage 2 population demonstrated that treatment with axalimogene filolisbac resulted in a 37.5% (9/24)
12-month survival rate. This data was consistent with the findings in Stage 1 that showed a 38.5% 12-month survival rate, despite
a greater proportion of Stage 2 patients having failed bevacizumab treatment. Taken together, the available data from both stages
of GOG-0265 comprise a Phase 2 clinical trial in 50 subjects with a 12 month survival rate of 38% (19/50). The protocol defined
logistic model-based calculation of the expected 12-month milestone survival rate was calculated to be 24.5% using the key predictors
from the patients enrolled in the trial. The 12 month survival rate of 38% for patients receiving axalimogene filolisbac
in the trial represented a 52% improvement over the expected 12-month milestone survival rate of 24.5%.
Overall,
28 out of 50 (56%) patients experienced a Grade 1 or Grade 2 TRAE associated with axalimogene filolisbac infusion. The most common
(>30%) Grade 1 or Grade 2 TRAEs were fatigue, chills, anemia, nausea and fever. Eighteen (36%) patients experienced a Grade
3 TRAE and two patients experienced a Grade 4 AE, including a Klebsiella lung infection in one patient, and hypotension/cytokine
related symptoms in another patient, which were considered possibly related to treatment.
In
October 2016, upon review of these encouraging findings, the Company announced early closure of GOG-0265. Results from the GOG-0265
trial were presented as an oral late-breaker presentation at the Society of Gynecologic Oncology (“SGO”) annual
meeting on March 14, 2017. Based on these data, the Company has made a strategic decision to submit for conditional Marketing
Authorization (“MA”) in Europe.
Advaxis
is also conducting an ongoing clinical trial with axalimogene filolisbac through a collaboration agreement with MedImmune, the
global biologics research and development arm of AstraZeneca. This is a Phase 1/2, open-label, multicenter, dose determination
and expansion cohort trial to determine the recommended Phase 2 dose (“RP2D”) and evaluate the safety and efficacy
of axalimogene filolisbac, in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, IMFINZI
TM
(“durvalumab”), as a treatment for patients with metastatic squamous or non-squamous carcinoma of the cervix
and metastatic HPV-associated squamous cell carcinoma of the head and neck (“SCCHN”). The dose determination phase
of the trial is complete. Two dose cohorts were enrolled. Cohort 1 enrolled 5 patients with metastatic cervical cancer who received
1 x 10
9
cfu of axalimogene filolisbac + 3 mg/mg durvalumab. Cohort 2 enrolled 3 patients with metastatic cervical cancer
and 2 patients with SCCHN who received 1 x 10
9
cfu of axalimogene filolisbac + 10 mg/mg of durvalumab. No dose-limiting
toxicities were observed in either cohort. The RP2D was determined to be 1 x 10
9
cfu for axalimogene filolisbac + 10
mg/mg for durvalumab. Preliminary data showed that two patients with metastatic cervical cancer achieved a durable complete response
(with confirmation) and a partial response (without confirmation), respectively.
Treatment-related
adverse events (“TRAE”) were reported in 91% of patients; the majority were either Grade 1 (64%) or Grade 2 (55%)
events. The most commonly reported TRAEs were chills, fever, nausea and hypotension. Three patients reported Grade 3 TRAEs (1
x 10
9
+ 3 mg/kg rigor/chills; 1 x 10
9
+ 10 mg/kg - rigor/chills; and 1 x 10
9
+ 10 mg/kg - diarrhea
and shortness of breath). One patient experienced a grade 4 TRAE of hypotension. The safety profile of the combination of axalimogene
filolisbac + durvalumab was consistent with previous reported findings for both axalimogene filolisbac and durvalumab administered
as monotherapy.
Enrollment
in the Part A expansion phase (N = 20 patients with SCCHN) and Part B expansion phase (N=90 patients with metastatic cervical
cancer) are open to enrollment. As of the latest data cut-off date of October 18, 2017, 7 patients receiving 1 x 10
9
axalimogene filolisbac + 10 mg/kg durvalumab have been enrolled. In the Part B expansion, a total of 32 patients with metastatic
cervical cancer were randomized to receive either 10 mg/kg durvalumab alone (N=16 patients) or 1 x 10
9
axalimogene
filolisbac + 10 mg/kg durvalumab (N = 16 patients) expansion phases. The Company expects an interim readout of the safety and
efficacy data from the Part B expansion in 2019.
Ongoing
Registrational and Phase 3 Studies: ADXS-DUAL and axalimogene filolisbac
In
evaluating the data from GOG-0265, Advaxis observed that there was a significantly higher representation of alpha7 family viruses
in the PRmCC patient population than are typically seen at an initial diagnosis of cervical cancer. Although axalimogene filolisbac
had already been shown to improve survival in both alpha7 and alpha9 family cancers, the Company made the decision that late stage,
metastatic patients need a potent therapy that presents antigens to both families, in order to give them the best chance
to impede their disease progression. As a result, ADXS-DUAL was developed to have the potential to be even more potent against
the alpha7 family strains found in metastatic cervical cancer. ADXS-DUAL incorporates additional peptides to increase potency
against these alpha7 strains. ADXS-DUAL may give patients the best chance of benefit in the PRmCC setting, especially if combined
with a checkpoint inhibitor.
To
this end, the Company has entered into a clinical development collaboration agreement with BMS to evaluate their PD-1 immune checkpoint
inhibitor, OPDIVO
®
(“nivolumab”), in combination with ADXS-DUAL as a potential treatment option for
women with PRmCC. Advaxis plans to file an IND application for ADXS-DUAL in early 2018. Pending FDA feedback, we plan to initiate
a global, randomized, registrational quality trial in 1H 2018 and will evaluate this combination regimen in women with persistent,
recurrent or metastatic (squamous or non-squamous cell) carcinoma of the cervix who have failed at least one prior line of systemic
chemotherapy (“ADVANCE” or “
ADVA
xis Immunotherapy with
N
ivolumab to Treat Recurrent or Metastatic
CE
rvical Cancer”). Under the terms of the agreement, each party will bear its own internal costs and provide its
immunotherapy agents. Advaxis will sponsor the trial and pay third-party costs. Subject to the positive outcome of this
trial, the Company plans to file a Biologics License Application (“BLA”) for approval of ADXS-DUAL for metastatic
cervical cancer in combination treatment.
Women
who are diagnosed with high risk, locally advanced carcinoma of the cervix (“HRLACC”) face a higher chance that their
cancer may recur following initial treatment when compared to earlier stages of the disease. When cervical cancer recurs, there
are very few treatment options and the prognosis is dire. To address this unmet need, in 2016 the Company reached an agreement
with the FDA, under the Special Protocol Assessment (“SPA”) process, for a Phase 3 trial evaluating axalimogene filolisbac
in patients with HRLACC (“AIM2CERV” or “
A
dvaxis
Im
munotherapy
2
Prevent
Cerv
ical
Recurrence”) to be conducted in collaboration with the GOG/NRG Oncology.
AIM2CERV
is a double-blind, randomized, placebo-controlled, Phase 3 trial of adjuvant axalimogene filolisbac following primary chemoradiation
treatment of women with HRLACC. The primary objective of AIM2CERV is to compare the disease free survival of axalimogene filolisbac
to placebo administered in the adjuvant setting following standard concurrent chemotherapy and radiotherapy (“CCRT”)
administered with curative intent to patients with HRLACC. Secondary endpoints include examining overall survival and safety.
The company’s goal is to develop a treatment to prevent or reduce the risk of cervical cancer recurrence after primary,
standard of care treatment in women who are at high risk of recurrence. The AIM2CERV trial is expected to enroll 450 patients
globally and, subject to the positive outcome, is designed to support a BLA submission in the U.S. and in other territories around
the world.
The
trial is active in ten countries and is currently enrolling.
Axalimogene
filolisbac EU conditional approval Filing
Based
on scientific advice provided by the Paul Ehrlich Institute in Germany and the Medical Products Agency in Sweden, the Company
has made a strategic decision to submit for conditional Marketing Authorization (“MA”) in Europe. The company plans
to file for conditional MA under the requirements in the EMA’s Commission Regulation and Committee for Medicinal Products
for Human Use (“CHMP”) Guideline on MAs, which includes criteria such as a positive risk/benefit balance, unmet medical
needs being fulfilled, benefits to public health outweighing the additional data required, and a high likelihood that comprehensive
clinical data will be provided in the future.
Progress to date towards
submission of the filing includes axalimogene filolisbac’s designation as an ATMP, certification of quality and non-clinical
data by the CAT, CHMP confirmation of eligibility for Union Marketing Authorization, assignment of EU rapporteurs, and pre-submission
meetings held with the rapporteurs. Feedback from the rapporteurs advising the provision of additional clinical information in
the submission package led to a delay of the filing which is now planned for Q1 2018. Once the package is submitted, the CHMP
review process is expected to take approximately 13 months, and the Company plans to provide an update at the end of the review.
HPV
Franchise Licensing Agreements
Biocon
Limited (“Biocon”), our co-development and commercialization partner for axalimogene filolisbac in India and key emerging
markets, filed a Marketing Authorization Application (“MAA”) for licensure of this immunotherapy in India. The companies
are currently evaluating next steps.
Especificos
Stendhal SA de CV (“Stendhal”), the Company’s co-development and commercialization partner for axalimogene filolisbac
in Mexico, Brazil, Colombia and other Latin American countries, will pay $10 million in support payments towards the expense of
AIM2CERV over the duration of the trial, contingent upon Advaxis achieving annual project milestones.
Knight
Therapeutics Inc. (“Knight”), holds an exclusive license to commercialize axalimogene filolisbac in Canada, as well
as our other product candidates.
Advaxis
granted Global BioPharma (“GBP”) an exclusive license for the development and commercialization of axalimogene filolisbac
for the treatment of cervical cancer in Asia. GBP is responsible for all development and commercial costs and activities associated
with the development in their territories.
Head
and Neck Cancer
Squamous
Cell Carcinoma of the Head and Neck (“SCCHN”) is the most frequently occurring malignant tumor of the head and neck
and is a major cause of morbidity and mortality worldwide. More than 90% of SCCHNs originate from the mucosal linings of the oral
cavity, pharynx, or larynx and 70% of these cancers are caused by HPV. According to the American Cancer Society, head and neck
cancer accounts for about 3% of all cancers in the United States. But while the Pap smear and other HPV tests have reduced rates
of cervical cancer, rates of oral cancer are growing, with 12,000 new cases projected to be diagnosed in the United Stated in
2016 according to the Surveillance, Epidemiology, and End Results (“SEER”) database.
A
study published in the Annals of Internal Medicine found that 11.5% percent of U.S. men and 3% of women were actively infected
with oral HPV between 2011 and 2014. That adds up to 11 million men and 3 million women who are at risk for developing SCCHN.
SCCHN is typically asymptomatic until it has metastasized, and screening options do not exist. The only way to prevent infection
is the HPV vaccine, but compliance has been low to date. Another challenge is that preventative vaccines cannot protect those
already infected or older than 26, leaving several generations of Americans vulnerable to SCCHN with no way of knowing if cancer
is silently growing.
The
safety and immunogenicity of axalimogene filolisbac is being evaluated in a Phase 2 IST at Mount Sinai and Baylor College of Medicine
in a pre-surgery “window of opportunity” trial in patients with HPV-positive head and neck cancer. This clinical trial
is the first to evaluate the immunologic and pathologic effects of axalimogene filolisbac in patients at the time of initial diagnosis
of HPV-associated head and neck cancer. The trial is designed to show that axalimogene filolisbac is highly immunogenic and worth
further investigation if the overall rate of vaccine-induced T-cell responses is 75 percent or more. Preliminary clinical data
from this trial was presented at the American Association of Cancer Research (“AACR”) annual meeting on April 18,
2016. The data from eight of the nine patients enrolled in Stage 1 who were treated with axalimogene filolisbac confirmed that
the trial met the target for the overall rate of vaccine-induced T-cell response. The results demonstrated that HPV E7- and/or
E6-specific T cell responses increased in the peripheral blood in five of the trial patients. Increased infiltration of both CD4+
and CD8+ T cells were observed in the TME of four patients, with a reduction of FOXP3+ regulatory T cells within the tumors of
3/6 patients. Increased T cell responses to HPV E6 supports enhanced immune activity against additional tumor targets. Changes
to the TME included cytotoxic T cell infiltration into the post-resection tumor, increased immune activation, a reduction of regulatory
T cells, infiltration of cytotoxic T cells, and increased expression of inflammatory activation markers. In addition, fluctuations
of circulating serum cytokine (IL-15, IL-9, TNFa, IL-2 and MIP-1b) levels were observed potentially suggesting consumption by
activated T cells and migration of T cells to the TME. These results confirmed that the trial met its Stage 1 primary objective
which allowed accrual to proceed in the second stage of the trial which is intended. The Stage 2 objective is consistent with
Stage 1 and enrollment is ongoing.
As
stated above, we have entered into a clinical trial collaboration agreement with MedImmune to collaborate on a Phase 1/2,
open-label, multicenter, two part trial to evaluate safety and efficacy of axalimogene filolisbac, in combination with durvalumab
(MEDI4736), for patients with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN.
Part 1 of this trial is complete, and the Company has commenced enrollment in the Part A (20 patients with SCCHN) and B
(90 patients with cervical cancer) expansion phases.
We
will continue to be opportunistic towards alternative funding approaches for continued development in HPV-positive head and neck
cancer, and plan to announce an IST with a prestigious academic institution in 2018. Axalimogene filolisbac has received FDA orphan
drug designation for HPV-associated head and neck cancer.
Anal
Cancer
According
to the American Cancer Society, nearly all squamous cell anal cancers are linked to infection by HPV, the same virus that causes
cervical cancer. According to the SEER database, approximately 7,500 new cases will be diagnosed in the United States in 2016.
The
safety and efficacy of axalimogene filolisbac is being evaluated in a Phase 2 IST by Brown University in patients with high-risk
locally advanced anal cancer. As of December 2017, no further enrollment in this trial is planned. 10 patients were treated including
one with N2 and four with N3 disease. Two patients had grade 3 acute toxicities following the initial dose of axalimogene filolisbac
including chills/rigors (n = 2), back pain (n = 1), and hyponatremia (n = 1). All toxicities occurred within 24 hours of administration.
There was no apparent increase in chemoradiation toxicities or myelosuppression. One patient had a Grade 5 cardiopulmonary event
shortly after beginning 5-FU treatment. This patient did not receive a dose of axalimogene filolisbac. All 9 assessable patients
had complete clinical responses by sigmoidoscopy. Eight of the 9 patients (89%) are progression-free at a median follow-up of
42 months. These data were accepted and published in the International Journal of Radiation Oncology.
We
conducted a Phase 2 multi-center, open-label, Simon two-stage trial (“FAWCETT” or “
F
ighting
A
nal-Cancer
w
ith
C
TL
E
nhancing
T
umor
T
herapy”), testing axalimogene filolisbac in patients with persistent
or recurrent metastatic anal cancer. FAWCETT is designed to evaluate the efficacy and safety of axalimogene filolisbac as a monotherapy
in patients with HPV-associated metastatic anal cancer who have received at least one prior treatment regimen for the advanced
disease. Patients will receive intravenous axalimogene filolisbac monotherapy (1x10
9
CFU) every 3 weeks for
≤ 2 years or until a discontinuation criterion is met. Stage 1 of the trial targeted enrollment of 36 patients with anal cancer
whose disease recurred after receiving treatment, with an interim analysis planned on enrollment of 31 evaluable pts (≥ 1 post-baseline
scan) and met the predetermined safety and efficacy criteria required to proceed into the second stage of patient enrollment.
Preliminary
Stage 1 results from 29 of the planned evaluable patients showed 1 (3.5%) patient had a durable partial response lasting >
6 months (after progression on prior anti-PD-1 therapy) and 7 had stable disease (24%). Disease control rate was 28%. The current
Kaplan Meier 6-month PFS estimate is 22%, indicating the trial met the criteria to proceed to Stage 2 of enrollment. Common
(≥ 30%) TRAEs were grade 1-2 chills/rigors, fever, hypotension and vomiting. Grade 3 TRAEs of cytokine related symptoms (n=1;
SAE), infusion related reactions (n=2; 1 SAE) and hypotension (n=2; 1 SAE) were reported. These results were reported at the annual
meeting of the European Society for Medical Oncology (“ESMO”) in September 2017.
The
Company has decided not to initiate the Stage 2 portion of the trial in order to focus its resources on other clinical priorities
at this time. We will continue to evaluate alternative funding sources and collaborations to further develop this program. Axalimogene
filolisbac has received FDA and EMA orphan drug designation for anal cancer.
Neoantigen
Therapy (ADXS-NEO)
Lm
Technology is an effective vector for immunotherapy, and the Company made the decision to branch into the growing field of
individualized cancer treatments with ADXS-NEO. ADXS-NEO is designed to create individualized therapies by activating the patient’s
immune system to respond against multiple mutations, or neoantigens, identified from an individual patient’s tumor through
DNA sequencing. In August 2016, Advaxis entered into a global agreement with Amgen Inc. (“Amgen”) for the development
and commercialization of ADXS-NEO.
ADXS-NEO
is an individualized
Lm
Technology antigen delivery product developed using whole-exome sequencing of a patient’s
tumor to identify neoantigens. ADXS-NEO is designed to work by presenting a large payload of neoantigens directly into dendritic
cells within the patient’s immune system and stimulating a T cell response against cancerous cells.
The
FDA has cleared the initial IND application of ADXS-NEO and we will file an IND amendment in early 2018. This amendment is largely
driven by enhancements to the manufacturing and antigen selection processes. We do not expect this to impact our project
timelines, and we plan to initiate a Phase 1 trial in first half of 2018. The initial tumor types for the Phase 1 are non-small
cell lung cancer, microsatellite stable colorectal cancer, and head and neck cancer. The Company has entered into various research
collaborations, including the Parker Institute for Cancer Immunotherapy, to advance the trial of neoepitope-based, personalized
cancer therapy as part of the Tumor neoantigEn SeLection Alliance (“TESLA”) initiative.
Disease
focused hotspot / cancer antigen therapies (ADXS-HOT)
Advaxis
is creating a new group of immunotherapy constructs for major cancers that combines our optimized
Lm
Technology vector
with promising targets to generate potent anti-cancer immunity. The ADXS-HOT franchise is a series of novel cancer immunotherapies
that will target somatic mutations (“hotspots”), cancer testis antigens (“CTAs”) and oncofetal antigens
(“OFAs”). These three types of targets form the basis of the ADXS-HOT program because they are more capable of generating
potent, tumor specific, and high strength killer T cells, versus more traditional over-expressed native sequence TAAs. Most hotspot
mutations and OFA/CTA proteins play critical roles in oncogenesis; targeting both at once could significantly impair cancer proliferation.
The ADXS-HOT products will combine many of the potential high avidity targets that are expressed in all patients with the
target disease into one “off-the-shelf”, ready to administer treatment. The ADXS-HOT technology has a strong
Intellectual Property (“IP”) position, with potential protection into 2037, and an IP filing strategy providing for
broad coverage opportunities across multiple disease platforms and combination therapies.
The
Company is currently prioritizing product development in the most prevalent cancers, with the first indication planned to be Non
Small Cell Lung Cancer (“NSCLC”). Advaxis plans to file multiple ADXS-HOT INDs in 2018, including NSCLC, with our
first in human trial in one of the ADXS-HOT products to commence in 2018.
Prostate
Cancer (ADXS-PSA
)
According
to the American Cancer Society, prostate cancer is the second most common type of cancer found in American men, and is the second
leading cause of cancer death in men, behind only lung cancer. More than 161,000 men are estimated to be diagnosed with prostate
cancer in 2017, with over 26,000 deaths each year. Unfortunately, in about 10 – 20% of cases, men with prostate cancer will
go on to develop castration-resistant prostate cancer (“CRPC”), which refers to prostate cancer that progresses despite
androgen deprivation therapy. Metastatic CRPC (“mCRPC”) occurs when the cancer spreads to other parts of the body
and there is a rising prostate-specific antigen (“PSA”) level. This stage of prostate cancer has an average
survival of 9-13 months, is associated with deterioration in quality of life, and has few therapeutic options available.
According to a data review
published by MD Anderson Cancer Center in 2016, checkpoint inhibitor monotherapy has not shown significant activity in mCRPC to
date. The authors hypothesize that may be due to the inability of the checkpoint inhibitor to infiltrate the tumor microenvironment,
and that combination therapy with agents that induce T cell infiltration within the tumor may improve performance of checkpoints
in prostate cancer.
Lm
Technology constructs
have been shown by multiple labs to reduce number and suppressive function of Tregs and MDSCs in the tumor microenvironment and
cause the destruction of Tregs in the TME as soon as 5 days after dosing in models. This reduction of immune suppression
in the tumors has been attributed to our proprietary
tLLO
-fusion peptides expressed by multiple copies of the plasmids
in each bacteria. Advaxis feels that the combination of ADXS-PSA, our immunotherapy designed to target the PSA antigen, with a
checkpoint inhibitor may provide an alternative treatment option for patients with mCRPC. Clinical benefit in prostate cancer
could be a significant value creator to expand the
Lm
Technology platform into the prostate cancer market.
Advaxis has entered into
a clinical trial collaboration and supply agreement with Merck to evaluate the safety and efficacy of ADXS-PSA as monotherapy
and in combination with KEYTRUDA
®
(“pembrolizumab”), Merck’s anti PD-1 antibody, in a Phase 1/2,
open-label, multicenter, dose determination and expansion trial in patients with previously treated metastatic, castration-resistant
prostate cancer (Keynote-046). For the ADXS-PSA monotherapy dose escalation and determination portion of the trial, cohorts were
started at a dose of 1 x 10
9
cfu (n=7) and successfully escalated to higher dose levels of 5x10
9
cfu (n=3)
and 1x10
10
cfu (n=3) without achieving a maximum tolerated dose. Treatment emergent adverse events noted at these higher
dose levels were generally consistent with those observed at the lower dose level (1 x 10
9
cfu) other than a higher
occurrence rate of Grade 2/3 hypotension. The ADXS-PSA monotherapy dose-determination phase of the trial has been completed. The
RP2D of ADXS-PSA monotherapy was determined to be 1x 10
9
cfu based on a review of the totality of the clinical data.
This dose was used in combination with 200 mg of pembrolizumab in a cohort of 6 patients to evaluate the safety of the combination
before moving into an expanded cohort of patients (N=30 patients). The safety of the combination was confirmed and enrollment
in the expansion cohort phase was initiated. Enrollment in this phase of the trial was completed in January 2017.
Preliminary
data correlating clinical observations with immune data in mCRPC patients treated with ADXS-PSA monotherapy were presented at
the third annual CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference in September 2017. By profiling and quantifying
immune-related gene expression in patients before and after ADXS-PSA monotherapy, differences were noted between the pre- and
post-treatment immune status of stable disease (“SD”) and non-stable disease patients. 100% of the patients who achieved
SD (31%; 4/13) showed expansion of pre-existing, as well as generation of new T cells. There were significantly higher expression
levels of genes indicative of CD4+ and CD8+ T cell activation and genes supporting M1 macrophages, and lower expression levels
of immunosuppressive (protumor) genes. Patients with non-stable disease (69%; 9/13) exhibited gene expression profiles
suggesting a more immunosuppressive myeloid profile with asynchronous and unsustained clonal T cell expansions, and increased
expression of prostate cancer tumor markers in peripheral circulation. Together, these findings suggest that SD patients treated
with ADXS-PSA may have a more pro-inflammatory immunologic picture, fewer circulating tumor cells, and potentially less tumor
burden.
In
November 2017 at the Society for Immunotherapy of Cancer (“SITC”), the Company presented additional preliminary data
from this monotherapy arm that shows that after administration of ADXS-PSA, all 9 patients who received all three doses
saw increasing numbers and strength of T cells targeting PSA, using an ELISpot data analysis. In 56% (5/9) patients, this increase
was 3-fold. This data shows, for the first time clinically, that an
Lm
Technology construct has shown specific T cell generation
against a specific target. In addition, the Company evaluated four other markers expressed by prostate cancers and 100% (9/9)
patients had an increased frequency of T cells to at least one of these targets, demonstrating that antigen spreading after administration
of ADXS-PSA does occur in the clinic and can expand activity.
Preliminary safety
data shows the most common side effects include chills, fever, rigors, hypertension, fatigue, hypotension and vomiting which are
consistent with cytokine release in response to ADXS-PSA administration.
Viewed
collectively, the data presented at CRI-CIMT-EATI-AACR 2017 and SITC 2017 is an encouraging signal that ADXS-PSA allows for generation
of sustained, strengthened T cells against prostate cancer, while weakening the TME and allowing T cells access to the tumor.
The Company looks forward to providing additional data in 2018 from the combination arm of this trial with pembrolizumab.
In
addition, the Company is actively developing an additional product candidate for prostate cancer, currently in preclinical testing,
which could complement ADXS-PSA.
Other
Lm Technology Products
HER2
Expressing Solid Tumors
HER2
is overexpressed in a percentage of solid tumors including osteosarcoma. According to published literature, up to 60% of
osteosarcomas are HER2 positive, and this overexpression is associated with poor outcomes for patients.
ADXS-HER2
is an
Lm
Technology antigen delivery product candidate designed to target HER2 expressing solid tumors including human
and canine osteosarcoma. ADXS-HER2 has received FDA and EMA orphan drug designation for osteosarcoma and has received Fast Track
designation from the FDA for patients with newly-diagnosed, non-metastatic, surgically-resectable osteosarcoma.
The
dose finding phase of a Phase 1b trial in HER2 expressing tumors has been completed
.
Based
on priorities and focus, the Company has decided not to proceed to the expansion phase of the trial. The Company remains open
to investigator-initiated research or licensing proposals for ADXS-HER2.
Canine
Osteosarcoma
On
March 19, 2014, we entered into a definitive Exclusive License Agreement (the “Aratana Agreement”) with Aratana
Therapeutics Inc. (“Aratana”), where we granted Aratana an exclusive, worldwide, royalty-bearing license, with the
right to sublicense, certain of our proprietary technology that enables Aratana to develop and commercialize animal health products
that will be targeted for treatment of osteosarcoma and other cancer indications in animals. A product license request was
filed by Aratana for ADXS-HER2 (also known as AT-014 by Aratana) for the treatment of canine osteosarcoma with the United
States Department of Agriculture (“USDA”). Aratana received communication in December 2017 that the USDA granted
Aratana conditional licensure for AT-014 for the treatment of dogs diagnosed with osteosarcoma, one year of age or older. Aratana
plans to conduct an extended field study in a clinical setting and anticipates initiating the study in early 2018, which will
be fully funded by Aratana. Initially, Aratana plans to make the therapeutic available for purchase at approximately two dozen
veterinary oncology practice groups across the United States who participate in the study.
Aratana
has been granted exclusive worldwide rights by us to develop and commercialize ADXS-HER2 in animals. Aratana is further responsible
for the conduct of clinical research with ADXS-Survivin in canine/feline lymphoma, as well as pending investigations of two additional
Advaxis constructs in animals.
Under the terms of
the Aratana Agreement, Aratana paid an upfront payment to us in the amount of $1,000,000 upon signing of the Aratana Agreement.
Aratana will also pay us (a) up to $36.5 million based on the achievement of milestone relating to the advancement of products
through the approval process with the USDA in the United States and the relevant regulatory authorities in the European Union
(“E.U.”) in all four therapeutic areas and up to an additional $15 million in cumulative sales milestones based on
achievement of gross sales revenue targets for sales of any and all products for use in non-human animal health applications (the
“Aratana Field”) (regardless of therapeutic area), and (b) tiered royalties starting at 5% and going up to 10%, which
will be paid based on net sales of any and all products (regardless of therapeutic area) in the Aratana Field in the United States.
Royalties for sales of products outside of the United States will be paid at a rate equal to half of the royalty rate payable
by Aratana on net sales of products in the United States (starting at 2.5% and going up to 5%). Royalties will be payable on a
product-by-product and country-by-country basis from first commercial sale of a product in a country until the later of (a) the
10th anniversary of first commercial sale of such product by Aratana, its affiliates or sub licensees in such country or (b) the
expiration of the last-to-expire valid claim of our patents or joint patents claiming or covering the composition of matter, formulation
or method of use of such product in such country. Aratana will also pay us 50% of all sublicense royalties received by Aratana
and its affiliates.
Corporate
Information
We
were originally incorporated in the State of Colorado on June 5, 1987 under the name Great Expectations, Inc. We were a publicly-traded
“shell” company without any business until November 12, 2004 when we acquired Advaxis, Inc., a Delaware corporation,
through a Share Exchange and Reorganization Agreement, dated as of August 25, 2004, which we refer to as the Share Exchange, by
and among Advaxis, the stockholders of Advaxis and us. As a result of the Share Exchange, Advaxis became our wholly-owned subsidiary
and our sole operating company. On December 23, 2004, we amended and restated our articles of incorporation and changed our name
to Advaxis, Inc. On June 6, 2006, our stockholders approved the reincorporation of our company from Colorado to Delaware by merging
the Colorado entity into our wholly-owned Delaware subsidiary. Our date of inception, for financial statement purposes, is March
1, 2002 and the Company was uplisted to NASDAQ in 2014.
Our
principal executive offices and manufacturing facility is located at 305 College Road East, Princeton, New Jersey 08540 and our
telephone number is (609) 452-9813. We maintain a corporate website at www.advaxis.com which contains descriptions of our technology,
our product candidates and the development status of each drug. We make available free of charge through our Internet website
our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports,
as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We are
not including the information on our website as a part of, nor incorporating it by reference into, this report. You may read and
copy any materials we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 on official
business days during the hours of 10:00 a.m. to 3:00 p.m. Please call the SEC at 1-800-SEC-0330 for information on the Public
Reference Room. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements,
and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.
Intellectual
Property
Protection
of our intellectual property is important to our business. We have a robust and extensive patent portfolio that protects our product
candidates and
Lm
-based immunotherapy technology. Currently, we own or have rights to approximately 433 patents and applications,
which are owned, licensed from, or co-owned with University of Pennsylvania (“Penn”) , Merck, National Institute of
Health (“NIH”), and/or Augusta University. We continuously grow this portfolio by filing new applications to protect
our ongoing research and development efforts. We aggressively prosecute and defend our patents and proprietary technology. Our
patents and applications are directed to the compositions of matter, use, and methods thereof, of our
Lm
-LLO immunotherapies
for our product candidates, including axalimogene filolisbac, ADXS-DUAL, ADXS-PSA, ADXS-NEO, ADXS-HOT, ADXS-HER2.
Our
approach to the intellectual property portfolio is to create, maintain, protect, enforce and defend our proprietary rights for
the products we develop from our immunotherapy technology platform. We endeavor to maintain a coherent and aggressive strategic
approach to building our patent portfolio with an emphasis in the field of cancer vaccines.
Issued
patents which are directed to axalimogene filolisbac, ADXS-PSA, and ADXS-HER2 in the United States, will expire between 2017 and
2032. Issued patents directed to our product candidates axalimogene filolisbac, ADXS-PSA, and ADXS-HER2 outside of the United
States, will expire in 2032. Issued patents directed to our
Lm
-based immunotherapy platform in the United States, will
expire between 2017 and 2031. Issued patents directed to our
Lm
-based immunotherapy platform outside of the United States,
will expire between 2018 and 2033.
We
have pending patent applications directed to our product candidates axalimogene filolisbac, ADXS-PSA, ADXS-HER2, ADXS-NEO, ADXS-DUAL
and ADXS-HOT that, if issued would expire in the United States and in countries outside of the United States between 2020 and
2037. We have pending patent applications directed to methods of using of our product candidates axalimogene filolisbac, ADXS-DUAL,
ADXS-PSA, ADXS-NEO, ADXS-HOT, ADXS-HER2 directed to the following indications and others: HPV-related cervical cancer, prostate
cancer and her2/neu-expressing cancer, that, if issued would expire in the United States and in countries outside of the United
States between 2020 and 2037, depending on the specific indications.
We
will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable
patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our business.
Our
success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates, technology,
and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary
rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications
related to our proprietary technology, inventions, and improvements that are important to the development of our business. We
also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain
our proprietary position.
Any
patent applications which we have filed or will file or to which we have or will have license rights may not issue, and patents
that do issue may not contain commercially valuable claims. In addition, any patents issued to us or our licensors may not afford
meaningful protection for our products or technology, or may be subsequently circumvented, invalidated, narrowed, or found unenforceable.
Our processes and potential products may also conflict with patents which have been or may be granted to competitors, academic
institutions or others. As the pharmaceutical industry expands and more patents are issued, the risk increases that our processes
and potential products may give rise to interferences filed by others in the U.S. Patent and Trademark Office, or to claims of
patent infringement by other companies, institutions or individuals. These entities or persons could bring legal actions against
us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the related product or process. In
recent years, several companies have been extremely aggressive in challenging patents covering pharmaceutical products, and the
challenges have often been successful. If any of these actions are successful, in addition to any potential liability for damages,
we could be required to cease the infringing activity or obtain a license in order to continue to manufacture or market the relevant
product or process. We may not prevail in any such action and any license required under any such patent may not be made available
on acceptable terms, if at all. Our failure to successfully defend a patent challenge or to obtain a license to any technology
that we may require to commercialize our technologies or potential products could have a materially adverse effect on our business.
In addition, changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially
diminish the value of our intellectual property or narrow the scope of our patent protection.
We
also rely upon unpatented proprietary technology, and in the future may determine in some cases that our interests would be better
served by reliance on trade secrets or confidentiality agreements rather than patents or licenses. We may not be able to protect
our rights to such unpatented proprietary technology and others may independently develop substantially equivalent technologies.
If we are unable to obtain strong proprietary rights to our processes or products after obtaining regulatory clearance, competitors
may be able to market competing processes and products.
Others
may obtain patents having claims which cover aspects of our products or processes which are necessary for, or useful to, the development,
use or manufacture of our services or products. Should any other group obtain patent protection with respect to our discoveries,
our commercialization of potential therapeutic products and methods could be limited or prohibited.
The
Drug Development Process
The
product candidates in our pipeline are at various stages of preclinical and clinical development. The path to regulatory approval
includes multiple phases of clinical trials in which we collect data that will ultimately support an application to regulatory
authorities to allow us to market a product for the treatment, of a specific type of cancer. There are many difficulties and uncertainties
inherent in research and development of new products, resulting in high costs and variable success rates. Bringing a drug from
discovery to regulatory approval, and ultimately to market, takes many years and significant costs.
Clinical
testing, known as clinical trials or clinical studies, is either conducted internally by pharmaceutical or biotechnology companies
or is managed on behalf of these companies by Clinical Research Organizations (“CRO”). The process of conducting clinical
studies is highly regulated by the FDA, as well as by other governmental and professional bodies. In a clinical trial, participants
receive specific interventions according to the research plan or protocol created by the study sponsor and implemented by study
investigators. Clinical trials may compare a new medical approach to a standard one that is already available or to a placebo
that contains no active ingredients or to no intervention. Some clinical trials compare interventions that are already available
to each other. When a new product or approach is being studied, it is not usually known whether it will be helpful, harmful, or
no different than available alternatives. The investigators try to determine the safety and efficacy of the intervention by measuring
certain clinical outcomes in the participants.
Phase
1
. Phase 1 clinical trials begin when regulatory agencies allow initiation of clinical investigation of a new drug or product
candidate. They typically involve testing an investigational new drug on a limited number of patients. Phase 1 studies determine
a drug’s basic safety, maximum tolerated dose and how the drug is absorbed by, and eliminated from, the body. Typically,
cancer therapies are initially tested on late-stage cancer patients.
Phase
2.
Phase 2 clinical trials involve larger numbers of patients that have been diagnosed with the targeted disease or condition.
Phase 2 clinical trials gather preliminary data on effectiveness (where the drug works in people who have a certain disease or
condition) and to determine the common short-term side effects and risks associated with the drug. If Phase 2 clinical trials
show that an investigational new drug has an acceptable range of safety risks and probable effectiveness, a company will continue
to evaluate the investigational new drug in Phase 3 studies.
Phase
3.
Phase 3 clinical trials are typically controlled multi-center trials that involve a larger number of patients to ensure
the study results are statistically significant. The purpose is to confirm effectiveness and safety on a large scale and to provide
an adequate basis for physician labeling. These trials are generally global in nature and are designed to generate clinical data
necessary to submit an application for marketing approval to regulatory agencies.
Biologic
License Application (BLA)
. The results of the clinical trials using biologics are submitted to the FDA as part of a BLA. Following
the completion of Phase 3 studies, if the sponsor of a potential product in the United States believes it has sufficient information
to support the safety and effectiveness of the investigational new drug, the sponsor submits a BLA to the FDA requesting that
the investigational new drug be approved for marketing. The application is a comprehensive filing that includes the results of
all preclinical and clinical studies, information about the drug’s composition, and the sponsor’s plans for manufacturing,
packaging, labeling and testing the investigational new drug. The FDA’s review of an application is designated either as
a standard review with a target review time of 10 months or a priority review with a target of 6 months. Depending upon the completeness
of the application and the number and complexity of follow-up requests and responses between the FDA and the sponsor, the review
time can take months to many years. Once approved through this process, a drug may be marketed in the United States, subject to
any conditions imposed by the FDA.
Government
Regulations
General
Government
authorities in the United States and other countries extensively regulate, among other things, the preclinical and clinical testing,
manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of drugs.
In the United States, the FDA subjects drugs to rigorous review under the Federal Food, Drug and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations.
Orphan
Drug Designation
Under
the Orphan Drug Act (“ODA”), the FDA may grant Orphan Drug Designation (“ODD”) to a drug or biological
product intended to treat a rare disease or condition, which means a disease or condition that affects fewer than 200,000 individuals
in the United States, or more than 200,000 individuals in the United States, but for which there is no reasonable expectation
that the cost of developing and making a drug or biological product available in the United States will be recovered from domestic
sales of the product.
The
benefits of ODD can be substantial, including research and development tax credits and exemption from user fees, enhanced access
to advice from the FDA while the drug is being developed, and market exclusivity once the product reaches approval and begins
sales, provided that the new product is first to market and that this new product has not been previously approved for the same
orphan disease or condition, with or without orphan drug designation. In order to qualify for these incentives, a company must
apply for designation of its product as an “Orphan Drug” and obtain approval from the FDA. Orphan product designation
does not convey any advantage in or shorten the duration of the regulatory review and approval process; however, an ODD product
may be eligible for priority review. A drug that is approved for the ODD indication is granted seven years of orphan drug exclusivity.
During that period, the FDA generally may not approve any other application for the same product for the same indication, although
there are exceptions, most notably when the later product is shown to be clinically superior to the product with exclusivity.
We
currently have ODD with the FDA for axalimogene filolisbac for treatment of anal cancer (granted August 2013), HPV-associated
head and neck cancer (granted November 2013); and treatment of Stage II-IV invasive cervical cancer (granted May 2014). We also
have ODD with the FDA for ADXS-HER2 for the treatment of osteosarcoma (granted May 2014).
In
Europe, the Committee for Orphan Medicinal Products (“COMP”) issued a positive opinion on the application for ODD
of axalimogene filolisbac for the treatment of anal cancer (December 2015) and on the application for ODD of ADXS-HER2 for osteosarcoma
(November 2015).
Expedited
Programs for Serious Conditions
Four
FDA programs are intended to facilitate and expedite development and review of new drugs to address unmet medical need in the
treatment of serious or life-threatening conditions: fast track designation, breakthrough therapy designation, accelerated approval,
and priority review designation. We intend to avail ourselves of any and all of these programs as applicable to our products.
Non-U.S.
Regulation
Before
our products can be marketed outside the United States, they are subject to regulatory approval of the respective authorities
in the country in which the product should be marketed. The requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until
an appropriate application has been approved by the regulatory authorities in that country. The time spent in gaining approval
varies from that required for FDA approval, and in certain countries, the sales price of a product must also be approved. The
pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority,
satisfactory prices might not be approved for such product.
Collaborations,
Partnerships and Agreements
Collaborations,
partnerships and agreements are a key component of Advaxis’ corporate strategy. As a late stage biotechnology company without
sales revenue, partnerships are an essential part of the ongoing strategy. Additionally, the evolution of the field
of immunotherapy has resulted in combination treatments becoming ubiquitous; ongoing clinical studies and agreements with many
of the leading, large oncology pharmaceutical companies and teaching institutions ensures that
Lm
Technology will be a
key component of the cancer treatment protocols of the future.
Our
collaborators and partners include Amgen, Aratana, AstraZeneca, BMS, Biocon, GBP, Knight, Merck, Sellas Life Science Group, Stendhal,
and others. For more information, see Footnote 9. Collaboration and Licensing Agreements with this Form 10-K and is incorporated
herein by reference.
We
entered into an exclusive worldwide license agreement with Penn, on July 1, 2002 with respect to the innovative work of Yvonne
Paterson, Ph.D., Associate Dean for Research at the School of Nursing at Penn, and former Professor of Microbiology at Penn, in
the area of innate immunity, or the immune response attributed to immune cells, including dendritic cells, macrophages and natural
killer cells, that respond to pathogens non-specifically (subject to certain U.S. government rights). This agreement was amended
and restated as of February 13, 2007, and, thereafter, has been amended from time to time.
This
license, unless sooner terminated in accordance with its terms, terminates upon the latter of (a) the expiration of the last to
expire of the Penn patent rights; or (b) twenty years after the effective date of the license. Penn may terminate the license
agreement early upon the occurrence of certain defaults by us, including, but not limited to, a material breach by us of the Penn
license agreement that is not cured within 60 days after notice of the breach is provided to us.
The
license provides us with the exclusive commercial rights to the patent portfolio developed by Penn as of the effective date of
the license, in connection with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to
commercialize the technology. In exchange for the license, Penn received shares of our Common Stock. However, as of October 31,
2016, Penn does not own shares of our Common Stock. In addition, Penn is entitled to receive a non-refundable initial license
fee, royalty payments and milestone payments based on net sales and percentages of sublicense fees and certain commercial milestones.
Under the amended licensing agreement, Penn is entitled to receive 2.5% of net sales in the territory. Should annual net sales
exceed $250 million, the royalty rate will increase to 2.75%, but only with respect to those annual net sales in excess of $250
million. Additionally, Penn will receive tiered sales milestone payments upon the achievement of cumulative global sales ranging
between $250 million and $2 billion, with the maximum aggregate amounts payable to Penn in the event that maximum sales milestones
are achieved is $40 million. Notwithstanding these royalty rates, upon first in-human commercial sale (U.S. & E.U.), we have
agreed to pay Penn a total of $775,000 over a four-year period as an advance minimum royalty, which shall serve as an advance
royalty in conjunction with the above terms. In addition, under the license, we are obligated to pay an annual maintenance fee
of $100,000 commencing on December 31, 2010, and each December 31st thereafter for the remainder of the term of the agreement
until the first commercial sale of a Penn licensed product. We are responsible for filing new patents and maintaining and defending
the existing patents licensed to us and we are obligated to reimburse Penn for all attorney’s fees, expenses, official fees
and other charges incurred in the preparation, prosecution and maintenance of the patents licensed from Penn.
Upon
first regulatory approval in humans (US or EU), Penn will be entitled to a milestone payment of $600,000. Furthermore, upon the
achievement of the first sale of a product in certain fields, Penn will be entitled to certain milestone payments, as follows:
$2.5 million will be due upon the first in-human commercial sale (US or EU) of the first product in the cancer field and $1.0
million will be due upon the date of first in-human commercial sale (US or EU) of a product in each of the secondary strategic
fields sold.
Manufacturing
Current
Good Manufacturing Practices (“cGMPs”) are the standards identified to conform to requirements by governmental agencies
that control authorization and licensure for manufacture and distribution of drug products for either clinical investigations
or commercial sale. GMPs identify the requirements for procurement, manufacturing, testing, storage, distribution and the supporting
quality systems to ensure that a drug product is safe for its intended application. cGMPs are enforced in the United States by
the FDA, under the authorities of the Federal Food, Drug and Cosmetic Act and its implementing regulations and use the phrase
“current good manufacturing practices” (“cGMP”) to describe these standards.
Each
of Advaxis’ wholly owned product candidates is manufactured using a platform process, with uniform methods and testing procedures.
This allows for an accelerated pathway from construct discovery to clinical product delivery, while keeping cost of goods low.
The Company intends to add new constructs to this standardized manufacturing process as their pipeline evolves.
Advaxis
has entered into agreements with multiple third-party organizations (“CMOs”) to handle the manufacturing, testing,
and distribution of product candidates. These organizations have extensive experience within the biologics space and with the
production of clinical and commercial GMP supplies. In 2017, the Company expanded and standardized their external clinical manufacturing
network in order to access additional manufacture capacity as needed, and reduce their external manufacturing cost structure.
In
parallel, the Company has also continued to invest in internal process/analytical development, quality systems, manufacturing,
and quality control infrastructure with the goal of accelerating and advancing our pipeline. Advaxis has constructed a state-of-the-art
manufacturing facility and laboratory to develop and manufacture clinical-grade products, supporting the clinical trials and future
commercialization of the Company’s therapeutics. Increased manufacturing capability and capacity allows Advaxis to manufacture
its own material and reduce reliance on CMOs, and improve supply flexibility, scalability, lead times, and costs of goods. The
Company’s long-term manufacturing strategy is to leverage both their partners’ capabilities and their internal capabilities
in order to build a supply chain that is reliable, flexible, and cost competitive.
In
support of future conditional regulatory filing and future launch of axalimogene filolisbac in Europe, the Company has completed
a full mapping of supply chain requirements and has established and validated a commercial process and testing in Europe. The
Company plans to continue to refine end-to-end product delivery during the ongoing regulatory review process.
Competition
The
biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.
As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related research
and development expenses. While we believe that our product candidates, technology, knowledge and experience provide us with competitive
advantages, we face competition from established and emerging pharmaceutical and biotechnology companies, among others. The biotechnology
and biopharmaceutical industries are highly competitive, and this competition comes from both biotechnology firms and from major
pharmaceutical companies, including: Aduro Biotech, Agenus Inc., BMS, Celldex Therapeutics, Inovio Pharmaceutical Inc., ISA Pharmaceuticals,
AstraZeneca, Merck, Neon Therapeutics, Oncolytics Biotech Inc., Oncothyreon Inc., et al., each of which is pursuing cancer vaccines
and/or immunotherapies.
Many
of these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases,
substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience
competition in the development of our immunotherapies from universities and other research institutions and compete with others
in acquiring technology from such universities and institutions. In addition, certain of our immunotherapies may be subject to
competition from investigational new drugs and/or products developed using other technologies, some of which have completed numerous
clinical trials.
Our
competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory
authorities. Additionally, the timing of market introduction of some of our potential immunotherapies or of competitors’
products may be an important competitive factor. Accordingly, the speed with which we can develop immunotherapies, complete preclinical
testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive
factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy,
safety, administration, reliability, acceptance, availability, price and patent position.
Experience
and Expertise
Our
management team has extensive experience in oncology development, including contract research, development, manufacturing and
commercialization across a board range of science, technologies, and process operations. We have built internal capabilities supporting
research, clinical, medical, manufacturing and compliance operations and have extended our expertise with collaborations.
Employees
As
of October 31, 2017, we had 108 employees, all of which were full time employees, 87 of whom were engaged in research and development
activities and 21 of whom were engaged in finance, business development, facilities, human resources and administrative support.
Of our full-time employees, 28 hold Ph.D. degrees. None of our employees are represented by a labor union, and we consider our
relationship with our employees to be good.
We
will continue to rent necessary offices and laboratories to support our growing business.
Item
1A: Risk Factors.
You
should carefully consider the risks described below as well as other information provided to you in this annual report, including
information in the section of this document entitled “Forward-Looking Statements.” The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe
are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected, the value of our Common Stock could decline, and you
may lose all or part of your investment.
Risks
Related to our Business and Industry
We
are a clinical stage company.
We
are a clinical stage biotechnology company with a history of losses and can provide no assurance as to future operating results.
As a result of losses that will continue throughout our clinical stage, we may exhaust our financial resources and be unable to
complete the development of our products. We anticipate that our ongoing operational costs will increase significantly as we continue
conducting our clinical development program. Our deficit will continue to grow during our drug development period.
We
have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the indefinite
future due to the substantial investment in research and development. As of October 31, 2017, we had an accumulated deficit of
$301,142,227 and shareholders’ equity of $54,260,167. We expect to spend substantial additional sums on the continued administration
and research and development of proprietary products and technologies with no certainty that our immunotherapies will become commercially
viable or profitable as a result of these expenditures. If we fail to raise a significant amount of capital, we may need to significantly
curtail operations or cease operations in the near future. If any of our product candidates fail in clinical trials or does not
gain regulatory approval, we may never become profitable. Even if we achieve profitability in the future, we may not be able to
sustain profitability in subsequent periods.
Drug
discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure.
Product
candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy in humans.
Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming and expensive process that takes many years.
We cannot be sure that pre-clinical testing or clinical trials of any of our product candidates will demonstrate the safety, efficacy
and benefit-to-risk profile necessary to obtain marketing approvals. In addition, product candidates that experience success in
pre-clinical testing and early-stage clinical trials will not necessarily experience the same success in larger or late-stage
clinical trials, which are required for marketing approval.
Even
if we are successful in advancing a product candidate into the clinical development stage, before obtaining regulatory and marketing
approvals, we must demonstrate through extensive human clinical trials that the product candidate is safe and effective for its
intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory authorities and to the
independent committees responsible for the ethical review of clinical studies. There may be delays in preparing protocols or receiving
approval for them that may delay the start or completion of the clinical trials. In addition, clinical practices vary globally,
and there is a lack of harmonization among the guidance provided by various regulatory bodies of different regions and countries
with respect to the data that is required to receive marketing approval, which makes designing global trials increasingly complex.
There are a number of additional factors that may cause our clinical trials to be delayed, prematurely terminated or deemed inadequate
to support regulatory approval, such as:
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safety
issues up to and including patient death (whether arising with respect to trials by third parties for compounds in a similar
class as tour product or product candidate), inadequate efficacy, or an unacceptable risk-benefit profile observed at any
point during or after completion of the trials;
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slower
than expected rates of patient enrollment, which could be due to any number of factors, including failure of our third-party
vendors, including our CROs, to effectively perform their obligations to us, a lack of patients who meet the enrollment criteria
or competition from clinical trials in similar product classes or patient populations, or onerous treatment administration
requirements;
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the
risk of failure of our clinical investigational sites and related facilities, including our suppliers, to maintain compliance
with the FDA’s cGMP regulations or similar regulations in countries outside of the U.S., including the risk that these
sites fail to pass inspections by the appropriate governmental authority, which could invalidate the data collected at that
site or place the entire clinical trial at risk;
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any
inability to reach agreement or lengthy discussions with the FDA, equivalent regulatory authorities, or ethical review committees
on trial design that we are able to execute;
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changes
in laws, regulations, regulatory policy or clinical practices, especially if they occur during ongoing clinical trials or
shortly after completion of such trials.
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clinical
trial record keeping or data quality and accuracy issues.
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Any
deficiency in the design, implementation or oversight of our development programs could cause us to incur significant additional
costs, conduct additional trials, experience significant delays, prevent us from obtaining marketing approval for any product
candidate or abandon development of certain product candidates, any of which could harm our business and cause our stock price
to decline.
Our
operating history does not afford investors a sufficient history on which to base an investment decision.
We
commenced our
Lm
-LLO based immunotherapy development business in February 2002 and today exist as a clinical stage company.
We have no approved products and therefore have not derived any significant revenue from the sales of products and have not yet
demonstrated ability to obtain regulatory approval, formulate and manufacture commercial scale products, or conduct sales and
marketing activities necessary for successful product commercialization. Consequently, there is limited information for investors
to use as basis for assessing our future viability. Investors must consider the risks and difficulties we have encountered in
the rapidly evolving vaccine and immunotherapy industry. Such risks include the following:
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difficulties,
complications, delays and other unanticipated factors in connection with the development of new drugs;
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competition
from companies that have substantially greater assets and financial resources than we have;
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need
for acceptance of our immunotherapies;
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ability
to anticipate and adapt to a competitive market and rapid technological developments;
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need
to rely on outside funding due to the length of drug development cycles and governmental approved protocols associated with
the pharmaceutical industry; and
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dependence
upon key personnel including key independent consultants and advisors.
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We
cannot be certain that our strategy will be successful or that we will successfully address these risks. In the event that we
do not successfully address these risks, our business, prospects, financial condition and results of operations could be materially
and adversely affected. We may be required to reduce our staff, discontinue certain research or development programs of our future
products and cease to operate.
We
may face legal claims; litigation is expensive and we may not be able to afford the costs.
We
may face legal claims involving stockholders, consumers, competitors, regulators and other parties. As described in “Legal
Proceedings” in Part I Item 3 of this Form 10-K, we are engaged in a number of legal proceedings. Litigation and other legal
proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us
from engaging in business practices, or requiring other remedies, such as compulsory licensing of patents.
The
costs of litigation or any proceeding relating to our intellectual property or contractual rights could be substantial, even if
resolved in our favor. Some of our competitors or financial funding sources have far greater resources than we do and may be better
able to afford the costs of complex litigation. Also, a lawsuit, even if frivolous, will require considerable time commitments
on the part of management, our attorneys and consultants. Defending these types of proceedings or legal actions involve considerable
expense and could negatively affect our financial results.
We
can provide no assurance of the successful and timely development of new products.
Our
immunotherapies are at various stages of research and development. Further development and extensive testing will be required
to determine their technical feasibility and commercial viability. We will need to complete significant additional clinical trials
demonstrating that our product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory
authorities. The drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number
of factors, including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits
demonstrated in the clinical trials. Our success will depend on our ability to achieve scientific and technological advances and
to translate such advances into licensable, FDA-approvable, commercially competitive products on a timely basis. Failure can occur
at any stage of the process. If such programs are not successful, we may invest substantial amounts of time and money without
developing revenue-producing products. As we enter a more extensive clinical program for our product candidates, the data generated
in these studies may not be as compelling as the earlier results.
The
proposed development schedules for our immunotherapies may be affected by a variety of factors, including technological difficulties,
clinical trial failures, regulatory hurdles, clinical holds, competitive products, intellectual property challenges and/or changes
in governmental regulation, many of which will not be within our control. Any delay in the development, introduction or marketing
of our products could result either in such products being marketed at a time when their cost and performance characteristics
would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of
our projects, the unproven technology involved and the other factors described elsewhere in this section, there can be no assurance
that we will be able to successfully complete the development or marketing of any new products which could materially harm our
business, results of operations and prospects.
Our
research and development expenses are subject to uncertainty.
Factors
affecting our research and development expenses include, but are not limited to:
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competition
from companies that have substantially greater assets and financial resources than we have;
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need
for acceptance of our immunotherapies;
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ability
to anticipate and adapt to a competitive market and rapid technological developments;
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amount
and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
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need
to rely on multiple levels of outside funding due to the length of drug development cycles and governmental approved protocols
associated with the pharmaceutical industry; and
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dependence
upon key personnel including key independent consultants and advisors.
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There
can be no guarantee that our research and development expenses will be consistent from period to period. We may be required to
accelerate or delay incurring certain expenses depending on the results of our studies and the availability of adequate funding.
We
are subject to numerous risks inherent in conducting clinical trials.
We
outsource the management of our clinical trials to third parties. Agreements with clinical research organizations, clinical investigators
and medical institutions for clinical testing and data management services, place substantial responsibilities on these parties
that, if unmet, could result in delays in, or termination of, our clinical trials. For example, if any of our clinical trial sites
fail to comply with FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical
investigators, medical institutions or other third parties do not carry out their contractual duties or regulatory obligations
or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their
failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated,
and we may be unable to obtain regulatory approval for, or successfully commercialize, our agents. We are not certain that we
will successfully recruit enough patients to complete our clinical trials nor that we will reach our primary endpoints. Delays
in recruitment, lack of clinical benefit or unacceptable side effects would delay or prevent the initiation of future development
of our agents.
We
or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate
our clinical trials if at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials
or do not demonstrate clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation
of our clinical trials, or place our products on temporary or permanent hold, at any time if they believe that the clinical trials
are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk
to the patients enrolled in our clinical trials.
Our
clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our
clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive
reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions we or our clinical trial
sites have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may be criminally prosecuted.
The
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval for our product candidates, which would materially harm our business, results of operations and prospects.
The
successful development of immunotherapies is highly uncertain.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control.
Immunotherapies that appear promising in the early phases of development may fail to reach the market for several reasons including:
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preclinical
study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary
objectives) or to have harmful or problematic side effects;
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clinical
study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet its primary
endpoint) or to have unacceptable side effects;
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failure
to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may
be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements
for data analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical
or clinical data, or unexpected safety or manufacturing issues;
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manufacturing
costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and
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the
proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized.
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Success
in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results
are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time
necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory
authority varies significantly from one immunotherapy to the next, and may be difficult to predict.
Even
if we are successful in getting market approval, commercial success of any of our product candidates will also depend in large
part on the availability of coverage and adequate reimbursement from third-party payers, including government payers such as the
Medicare and Medicaid programs and managed care organizations, which may be affected by existing and future health care reform
measures designed to reduce the cost of health care. Third-party payers could require us to conduct additional studies, including
post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and
divert our resources. If government and other health care payers were not to provide adequate coverage and reimbursement levels
for one any of our products once approved, market acceptance and commercial success would be reduced.
In
addition, if one of our products is approved for marketing, we will be subject to significant regulatory obligations regarding
product promotion, the submission of safety and other post-marketing information and reports and registration, and will need to
continue to comply (or ensure that our third party providers) comply with cGMPs, and Good Clinical Practices (“GCP”),
for any clinical trials that we conduct post-approval. In addition, there is always the risk that we or a regulatory authority
might identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency.
Compliance with these requirements is costly, and any failure to comply or other issues with our product candidates’ post-market
approval could have a material adverse effect on our business, financial condition and results of operations.
We
must comply with significant government regulations.
The
research and development, manufacturing and marketing of human therapeutic and diagnostic products are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies and other
federal, state, local and foreign entities regulate, among other things, research and development activities (including testing
in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and
promotion of the products that we are developing. If we obtain approval for any of our product candidates, our operations will
be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statue and the federal False Claims Act, and privacy laws. Noncompliance with applicable
laws and requirements can result in various adverse consequences, including delay in approving or refusal to approve product licenses
or other applications, suspension or termination of clinical investigations, revocation of approvals previously granted, fines,
criminal prosecution, civil and criminal penalties, recall or seizure of products, exclusion from having our products reimbursed
by federal health care programs, the curtailment or restructuring of our operations, injunctions against shipping products and
total or partial suspension of production and/or refusal to allow a company to enter into governmental supply contracts.
The
process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA requirements for a new
human biological product to be marketed in the United States include: (1) the successful conclusion of preclinical laboratory
and animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an
IND to conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human
clinical trials to establish the safety and efficacy of the investigational new drug for its recommended use; and (4) filing by
a company and acceptance and approval by the FDA of a BLA for marketing approval of a biologic, to allow commercial distribution
of a biologic product. The FDA also requires that any drug or formulation to be tested in humans be manufactured in accordance
with its cGMP regulations. This has been extended to include any drug that will be tested for safety in animals in support of
human testing. The cGMPs set certain minimum requirements for procedures, record-keeping and the physical characteristics of the
laboratories used in the production of these drugs. A delay in one or more of the procedural steps outlined above could be harmful
to us in terms of getting our immunotherapies through clinical testing and to market.
We
can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
We
are currently evaluating the safety and efficacy of several of our candidates in a number of ongoing pre-clinical and clinical
trials. However, even though the initiation and conduct of the clinical trials is in accordance with the governing regulatory
authorities in each country, as with any investigational new drug (under an IND in the United States, or the equivalent in countries
outside of the United States), we are at risk of a clinical hold at any time based on the evaluation of the data and information
submitted to the governing regulatory authorities.
There
can be delays in obtaining FDA (U.S.) and/or other necessary regulatory approvals in the United States and in countries outside
the United States for any investigational new drug and failure to receive such approvals would have an adverse effect on the investigational
new drug’s potential commercial success and on our business, prospects, financial condition and results of operations. The
time required to obtain approval by the FDA and non-U.S. regulatory authorities is unpredictable but typically takes many years
following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory
authorities. For example, the FDA or non-U.S. regulatory authorities may disagree with the design or implementation of our clinical
trials or study endpoints; or we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh
its safety risks. In addition, the FDA or non-U.S. regulatory authorities may disagree with our interpretation of data from preclinical
studies or clinical trials or the data collected from clinical trials of our product candidates may not be sufficient to support
the submission of a New Drug Application (“NDA”) or other submission or to obtain regulatory approval in the United
States or elsewhere. The FDA or non-U.S. regulatory authorities may fail to approve the manufacturing processes or facilities
of third-party manufacturers with which we contract for clinical and commercial supplies; and the approval policies or regulations
of the FDA or non-U.S. regulatory authorities may significantly change in a manner rendering our clinical data insufficient for
approval.
In
addition to the foregoing, approval policies, regulations, or the type and amount of clinical data necessary to gain approval
may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not
submitted for nor obtained regulatory approval for any product candidate in-humans (US & EU) and it is possible that none
of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory
approval.
We
may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.
Although
we have been granted FDA orphan drug designation for axalimogene filolisbac for use in the treatment of anal cancer, HPV-associated
head and neck cancer, Stage II-IV invasive cervical cancer and for ADXS-HER2 for the treatment of osteosarcoma in the United States,
as well as EMA orphan drug designation for axalimogene filolisbac for the treatment of anal cancer and for ADXS-HER2 for the treatment
of osteosarcoma in the EU, and intend to continue to expand our designation for these uses where applicable , we may not receive
the benefits associated with orphan drug designation. This may result from a failure to maintain orphan drug status, or result
from a competing product reaching the market that has an orphan designation for the same disease indication. Under U.S. rules
for orphan drugs, if such a competing product reaches the market before ours does, the competing product could potentially obtain
a scope of market exclusivity that limits or precludes our product from being sold in the United States for seven years. Even
if we obtain exclusivity, the FDA could subsequently approve the same drug for the same condition if the FDA concludes that the
later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
A competitor also may receive approval of different products for the same indication for which our orphan product has exclusivity,
or obtain approval for the same product but for a different indication for which the orphan product has exclusivity.
In
addition, if and when we request orphan drug designation in Europe, the European exclusivity period is ten years but can be reduced
to six years if the drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so
that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMEA determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the
needs of patients with the rare disease or condition.
We
rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable
for infringing the intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies, including the
Lm
-LLO based immunotherapy platform technology, and the proprietary technology of others with whom we have entered into
collaboration and licensing agreements.
Currently,
we own or have rights to approximately 433 patents and applications, which are owned, licensed from, or co-owned with Penn, Merck,
NIH, and/or Augusta University. We have obtained the rights to all future patent applications in this field originating in the
laboratories of Dr. Yvonne Paterson and Dr. Fred Frankel, at the University of Pennsylvania.
We
own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents and foreign
counterparts. Our success depends in part on our ability to obtain patent protection both in the United States and in other countries
for our product candidates, as well as the methods for treating patients in the product indications using these product candidates.
Such patent protection is costly to obtain and maintain, and we cannot guarantee that sufficient funds will be available. Our
ability to protect our product candidates from unauthorized or infringing use by third parties depends in substantial part on
our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability,
validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our
ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if our product
candidates, as well as methods for treating patients for prescribed indications using these product candidates are covered by
valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents
will provide protection only for a limited amount of time. Accordingly, rights under any issued patents may not provide us with
sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against
competitive products or processes.
In
addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed
to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or
enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable
to us. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United
States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.
Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries offer
different degrees of protection against use of the patented invention by others. If we encounter such difficulties in protecting
or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business
prospects could be substantially harmed.
The
patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual
questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable,
invalidated, or circumvented as a result of laws, rules and guidelines that are changed due to legislative, judicial or administrative
actions, or review, which render our patents unenforceable or invalid. Our patents can be challenged by our competitors who can
argue that our patents are invalid, unenforceable, lack utility, sufficient written description or enablement, or that the claims
of the issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors
devise ways of making or using these product candidates without infringing our patents.
We
will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our technologies,
methods of treatment, product candidates, and any future products are covered by valid and enforceable patents or are effectively
maintained as trade secrets and we have the funds to enforce our rights, if necessary.
The
expiration of our owned or licensed patents before completing the research and development of our product candidates and receiving
all required approvals in order to sell and distribute the products on a commercial scale can adversely affect our business and
results of operations.
Litigation
regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in
such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our
success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The pharmaceutical
industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may
obtain patents in the future and allege that the products or use of our technologies infringe these patent claims or that we are
employing their proprietary technology without authorization.
In
addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent
applications or those of others could result in adverse decisions regarding:
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the
patentability of our inventions relating to our product candidates; and/or
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the
enforceability, validity or scope of protection offered by our patents relating to our product candidates.
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Even
if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing
these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of
others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court.
Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action
successfully or have infringed patents declared valid, we may:
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incur
substantial monetary damages;
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encounter
significant delays in bringing our product candidates to market; and/or
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be
precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.
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We
may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We
also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently
discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and
determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect
our competitive business position.
We
are dependent upon our license agreement with Penn; if we breach the license agreement and/or fail to make payments due and owing
to Penn under our license agreement, our business will be materially and adversely affected.
Pursuant
to the terms of our license agreement with Penn, which has been amended from time to time, we have acquired exclusive worldwide
licenses for patents and patent applications related to our proprietary Listeria vaccine technology. The license provides us with
the exclusive commercial rights to the patent portfolio developed at Penn as of the effective date of the license, in connection
with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to commercialize the technology.
As of October 31, 2017, we had no outstanding payments to Penn. We can provide no assurance that we will be able to make all future
payments due and owing thereunder, that such licenses will not be terminated or expire during critical periods, that we will be
able to obtain licenses from Penn for other rights that may be important to us, or, if obtained, that such licenses will be obtained
on commercially reasonable terms. The loss of any current or future licenses from Penn or the exclusivity rights provided therein
could materially harm our business, financial condition and operating results.
If
we are unable to obtain licenses needed for the development of our product candidates, or if we breach any of the agreements under
which we license rights to patents or other intellectual property from third parties, we could lose license rights that are important
to our business.
If
we are unable to maintain and/or obtain licenses needed for the development of our product candidates in the future, we may have
to develop alternatives to avoid infringing on the patents of others, potentially causing increased costs and delays in drug development
and introduction or precluding the development, manufacture, or sale of planned products. Some of our licenses provide for limited
periods of exclusivity that require minimum license fees and payments and/or may be extended only with the consent of the licensor.
We can provide no assurance that we will be able to meet these minimum license fees in the future or that these third parties
will grant extensions on any or all such licenses. This same restriction may be contained in licenses obtained in the future.
Additionally,
we can provide no assurance that the patents underlying any licenses will be valid and enforceable. To the extent any products
developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross profit from such product
sales and may render the sales of such products uneconomical. In addition, the loss of any current or future licenses or the exclusivity
rights provided therein could materially harm our business financial condition and our operations.
We
have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We
currently have agreements with various third party manufacturing facilities for production of many of our immunotherapies for
research and development and testing purposes. While we have built our own manufacturing facility onsite in Princeton to manufacture
clinical materials for some of our products, included ADXS-NEO, we depend on third-party manufacturers to supply most of our preclinical
and clinical materials and will be reliant on a third-party manufacturer to produce axalimogene filolisbac on a commercial scale,
should that product receive regulatory approval. Third-party manufacturers must be able to meet our deadlines as well as
adhere to quality standards and specifications. Our predominant reliance on third parties for the manufacture of our drug substance,
investigational new drugs and, in the future, any approved products, creates a dependency that could severely disrupt our research
and development, our clinical testing, and ultimately our sales and marketing efforts if the source of such supply proves to be
unreliable or unavailable. If our own manufacturing operation or any contracted manufacturing operation is unreliable or unavailable,
we may not be able to manufacture clinical drug supplies of our immunotherapies, and our preclinical and clinical testing programs
may not be able to move forward and our entire business plan could fail. If we are able to commercialize our products in the future,
there is no assurance that our own manufacturing operation or any third-party manufacturers will be able to meet commercialized
scale production requirements in a timely manner or in accordance with applicable standards or current GMP.
If
we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our
strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of our clinical
product candidates, and we may rely even more on strategic collaborations for research, development, marketing and commercialization
for some of our immunotherapies. To date, we have been heavily reliant upon third party outsourcing for our clinical trials execution
and production of drug supplies for use in clinical trials. Establishing strategic collaborations is difficult and time-consuming.
Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all.
For example, potential collaborators may reject collaborations based upon their assessment of our financial, clinical, regulatory
or intellectual property position. Our current collaborations, as well as any future new collaborations, may never result in the
successful development or commercialization of our immunotherapies or the generation of sales revenue. To the extent that we have
entered or will enter into co-promotion or other collaborative arrangements, our product revenues are likely to be lower than
if we directly marketed and sold any products that we may develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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financial
funding to support said collaboration;
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coordination
of our research and development programs with the research and development priorities of our collaborators; and
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effective
allocation of our resources to multiple projects.
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If
we continue to enter into research and development collaborations at the early phases of drug development, our success will in
part depend on the performance of our corporate collaborators. We will not directly control the amount or timing of resources
devoted by our corporate collaborators to activities related to our immunotherapies. Our corporate collaborators may not commit
sufficient resources to our research and development programs or the commercialization, marketing or distribution of our immunotherapies.
If any corporate collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to
this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products
or alternative technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators
may have the right to terminate those agreements.
We
may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.
We
face an inherent risk of product liability exposure related to the testing of our immunotherapies in human clinical trials, and
will face an even greater risk if the approved products are sold commercially. An individual may bring a liability claim against
us if one of the immunotherapies causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased
demand for our immunotherapies;
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damage
to our reputation;
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withdrawal
of clinical trial participants;
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costs
of related litigation;
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substantial
monetary awards to patients or other claimants;
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loss
of revenues;
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the
inability to commercialize immunotherapies; and
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increased
difficulty in raising required additional funds in the private and public capital markets.
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We
have Product Liability and Clinical Trial Liability insurance coverage for each clinical trial. We do not have product liability
insurance for sold commercial products because we do not have products on the market. We currently are in the process of obtaining
insurance coverage and plan to expand such coverage to include the sale of commercial products if marketing approval is obtained
for any of our immunotherapies. However, insurance coverage is increasingly expensive and we may not be able to maintain insurance
coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability
that may arise.
We
may incur significant costs complying with environmental laws and regulations.
We
and our contracted third parties use hazardous materials, including chemicals and biological agents and compounds that could be
dangerous to human health and safety or the environment. As appropriate, we store these materials and wastes resulting from their
use at our or our outsourced laboratory facility pending their ultimate use or disposal. We contract with a third party to properly
dispose of these materials and wastes. We are subject to a variety of federal, state and local laws and regulations governing
the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with such laws and
regulations may be costly.
If
we use biological materials in a manner that causes injury, we may be liable for damages.
Our
research and development activities involve the use of biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials complies with federal, state and local laws and regulations, we cannot entirely
eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We do
not carry specific biological waste or pollution liability or remediation insurance coverage, nor do our workers’ compensation,
general liability, and property and casualty insurance policies provide coverage for damages and fines/penalties arising from
biological exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages
or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended
or terminated.
We
need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
As
of December 15, 2017, we had 108 employees, all of which were full time employees. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition for these types of personnel from other technology
companies and more established organizations, many of which have significantly larger operations and greater financial, technical,
human and other resources than we have. We may not be successful in attracting and retaining qualified personnel on a timely basis,
on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, or integrating them into
our operations, our business, prospects, financial condition and results of operations will be materially adversely affected.
In such circumstances we may be unable to conduct certain research and development programs, unable to adequately manage our clinical
trials and other products, unable to commercialize any products, and unable to adequately address our management needs.
We
depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.
We
depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants. The loss or
unavailability of the services of any of these individuals for any significant period of time could have a material adverse effect
on our business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the beneficiary
of, key-person life insurance.
The
biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of competition.
We may be unable to compete with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.
As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related research
and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific
and technological factors. These factors include the availability of patent and other protection for technology and products,
the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing
and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing
number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies
have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have
developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies.
These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with
us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with
other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital
to us.
We
are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention,
diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical
products that have the potential to directly compete with our immunotherapies even though their approach to may be different.
The biotechnology and biopharmaceutical industries are highly competitive, and this competition comes from both biotechnology
firms and from major pharmaceutical companies, including companies like: Aduro Biotech, Agenus Inc., Celldex Therapeutics, Inovio
Pharmaceutical Inc., ISA Pharmaceuticals, MedImmune LLC, Neon Therapeutics, Oncolytics Biotech Inc. and Oncothyreon Inc., each
of which is pursuing cancer vaccines and/or immunotherapies. Many of these companies have substantially greater financial, marketing,
and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing,
and marketing of pharmaceutical products). We also experience competition in the development of our immunotherapies from universities
and other research institutions and compete with others in acquiring technology from such universities and institutions.
In
addition, certain of our immunotherapies may be subject to competition from investigational new drugs and/or products developed
using other technologies, some of which have completed numerous clinical trials.
We
may not obtain or maintain the benefits associated with breakthrough therapy designation.
If
we apply for Breakthrough Therapy Designation (“BTD”), we may not be granted BTD, or even if granted, we may not receive
the benefits associated with BTD. This may result from a failure to maintain breakthrough therapy status if it is no longer considered
to be a breakthrough therapy. For example, a drug’s development program may be granted BTD using early clinical testing
that shows a much higher response rate than available therapies. However, subsequent interim data derived from a larger study
may show a response that is substantially smaller than the response seen in early clinical testing. Another example is where BTD
is granted to two drugs that are being developed for the same use. If one of the two drugs gains traditional approval, the other
would not retain its designation unless its sponsor provided evidence that the drug may demonstrate substantial improvement over
the recently approved drug. When BTD is no longer supported by emerging data or the designated drug development program is no
longer being pursued, the FDA may choose to send a letter notifying the sponsor that the program is no longer designated as a
breakthrough therapy development program.
We
believe that our immunotherapies under development and in clinical trials will address unmet medical needs in the treatment of
cancer. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’
products may be an important competitive factor. Accordingly, the relative speed with which we can develop immunotherapies, complete
preclinical testing, clinical trials and approval processes and supply commercial quantities to market is expected to be important
competitive factors. We expect that competition among products approved for sale will be based on various factors, including product
efficacy, safety, reliability, availability, price and patent position.
Approval
of our product candidates does not ensure successful commercialization and reimbursement.
We
are not currently marketing our product candidates, however we are seeking commercial opportunities for axalimogene filolisbac.
We cannot assure you that we will be able to commercialize it or any other candidate ourselves or find a commercialization partner
or that we will be able to agree to acceptable terms with any partner to launch and commercialize our products.
The
commercial success of our product candidates is subject to risks in both the United States and European countries. In addition,
in European countries, pricing and payment of prescription pharmaceuticals is subject to more extensive governmental control than
in the United States. Pricing negotiations with European governmental authorities can take six to 12 months or longer after the
receipt of regulatory approval and product launch. If reimbursement is unavailable in any country in which reimbursement is sought,
limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our ability or any potential partner’s
ability to successfully commercialize in such a country would be impacted negatively. Furthermore, if these measures prevent us
or any potential partner from selling on a profitable basis in a particular country, they could prevent the commercial launch
or continued sale in that country and could adversely impact the commercialization market opportunity in other countries.
Moreover,
as a condition of approval, the regulatory authorities may require that we conduct post-approval studies. Those studies may reveal
new safety or efficacy findings regarding our drug that could adversely impact the continued commercialization or future market
opportunity in other countries.
In
addition, Advaxis predominantly relies on a network of suppliers and vendors to manufacture its products. Should a regulatory
authority make any significant findings on an inspection of Advaxis’ own operations or the operations of those companies,
the ability of Advaxis to continue producing its products could be adversely impacted and further production could cease.
Regulatory GMP requirements are extensive and can present a risk of injury or recall, among other risks, if not manufactured or
labeled properly under GMPs.
Our
potential revenues from the commercialization of our product candidates are subject to these and other factors, and therefore
we may never reach or maintain profitability.
Risks
Related to our Securities
The
price of our Common Stock and warrants may be volatile.
The
trading price of our Common Stock and warrants may fluctuate substantially. The price of our Common Stock and warrants that will
prevail in the market may be higher or lower than the price you have paid, depending on many factors, some of which are beyond
our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your
investment in our Common Stock and warrants. Those factors that could cause fluctuations include, but are not limited to, the
following:
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price
and volume fluctuations in the overall stock market from time to time;
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fluctuations
in stock market prices and trading volumes of similar companies;
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actual
or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities analysts;
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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general
economic conditions and trends;
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positive
and negative events relating to healthcare and the overall pharmaceutical and biotech sector;
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major
catastrophic events;
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sales
of large blocks of our stock;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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departures
of key personnel;
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changes
in the regulatory status of our immunotherapies, including results of our clinical trials;
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events
affecting Penn or any current or future collaborators;
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announcements
of new products or technologies, commercial relationships or other events by us or our competitors;
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regulatory
developments in the United States and other countries;
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failure
of our Common Stock or warrants to be listed or quoted on The NASDAQ Stock Market, NYSE Amex Equities or other national market
system;
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changes
in accounting principles; and
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discussion
of us or our stock price by the financial and scientific press and in online investor communities.
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In
the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target
of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s
attention and resources from our business.
A
limited public trading market may cause volatility in the price of our Common Stock.
The
quotation of our Common Stock on the NASDAQ does not assure that a meaningful, consistent and liquid trading market currently
exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected
the market prices of many smaller companies like us. Our Common Stock is thus subject to this volatility. Sales of substantial
amounts of Common Stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our
Common Stock and our stock price may decline substantially in a short time and our shareholders could suffer losses or be unable
to liquidate their holdings.
The
market prices for our Common Stock may be adversely impacted by future events.
Our
Common Stock began trading on the over-the-counter-markets on July 28, 2005 and is currently quoted on the NASDAQ Stock Market
under the symbol ADXS. Market prices for our Common Stock and warrants will be influenced by a number of factors, including:
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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changes
in interest rates;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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competitive
developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
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variations
in quarterly operating results;
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change
in financial estimates by securities analysts;
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the
depth and liquidity of the market for our Common Stock and warrants;
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investor
perceptions of our company and the pharmaceutical and biotech industries generally; and
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general
economic and other national conditions.
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If
we fail to remain current with our listing requirements, we could be removed from the NASDAQ Capital Market, which would limit
the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary
market.
Companies
trading on the NASDAQ Marketplace, such as our Company, must be reporting issuers under Section 12 of the Exchange Act, as amended,
and must meet the listing requirements in order to maintain the listing of our Common Stock on the NASDAQ Capital Market. If we
do not meet these requirements, the market liquidity for our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Sales
of additional equity securities may adversely affect the market price of our Common Stock and your rights may be reduced.
We
expect to continue to incur drug development and selling, general and administrative costs, and to satisfy our funding requirements,
we will need to sell additional equity securities, which may be subject to registration rights and warrants with anti-dilutive
protective provisions. The sale or the proposed sale of substantial amounts of our Common Stock or other equity securities in
the public markets may adversely affect the market price of our Common Stock and our stock price may decline substantially. Our
shareholders may experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their
shares. Also, new equity securities issued may have greater rights, preferences or privileges than our existing Common Stock.
Additional
authorized shares of Common Stock available for issuance may adversely affect the market price of our securities.
We are currently authorized
to issue 65,000,000 shares of our Common Stock. As of December 15, 2017, we had 41,303,988 shares of our Common Stock issued
and outstanding, excluding shares issuable upon exercise of our outstanding warrants, options, convertible promissory notes and
shares of Common Stock earned but not yet issued under our director compensation program. Under our 2011 Employee Stock Purchase
Plan, or ESPP, our employees can buy our Common Stock at a discounted price. To the extent the shares of Common Stock are issued,
options and warrants are exercised or convertible promissory notes are converted, holders of our Common Stock will experience
dilution. In the event of any future financing of equity securities or securities convertible into or exchangeable for, Common
Stock, holders of our Common Stock may experience dilution. In addition, as of December 15, 2017, we had outstanding options to
purchase 4,380,557 shares of our Common Stock at a weighted average exercise price of approximately $11.47 per share and outstanding
warrants to purchase 3,092,395 shares of our Common Stock (including the above warrants subject to weighted-average anti-dilution
protection); and zero shares of our Common Stock are available for grant under the ESPP.
We
do not intend to pay cash dividends.
We
have not declared or paid any cash dividends on our Common Stock, and we do not anticipate declaring or paying cash dividends
for the foreseeable future. Any future determination as to the payment of cash dividends on our Common Stock will be at our Board
of Directors’ discretion and will depend on our financial condition, operating results, capital requirements and other factors
that our Board of Directors considers to be relevant.
Our
certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent a
change in control, which may cause our stock price to decline.
Our
certificate of incorporation, Bylaws and Delaware law contain provisions which could make it more difficult for a third party
to acquire us, even if closing such a transaction would be beneficial to our shareholders. To date, we have not issued shares
of preferred stock, however, we are authorized to issue up to 5,000,000 shares of preferred stock. This preferred stock may be
issued in one or more series, the terms of which may be determined at the time of issuance by our Board of Directors without further
action by shareholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions.
The issuance of any preferred stock could materially adversely affect the rights of the holders of our Common Stock, and therefore,
reduce the value of our Common Stock. In particular, specific rights granted to future holders of preferred stock could be used
to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions
of our certificate of incorporation, Bylaws and Delaware law also could have the effect of discouraging potential acquisition
proposals or making a tender offer or delaying or preventing a change in control, including changes a shareholder might consider
favorable. Such provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. In
particular, the certificate of incorporation, Bylaws and Delaware law, as applicable, among other things; provide the Board of
Directors with the ability to alter the Bylaws without shareholder approval, and provide that vacancies on the Board of Directors
may be filled by a majority of directors in office, although less than a quorum.
We
are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation and an “interested shareholder,” which is generally
defined as a shareholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year
period following the date that such shareholder became an interested shareholder.
These
provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first negotiate with its board. These provisions may delay or prevent someone
from acquiring or merging with us, which may cause the market price of our Common Stock to decline.
Item
1B: Unresolved Staff Comments.
None.
Item
2. Properties.
Our
corporate offices and manufacturing facility are located in approximately 48,500 square feet of office space at 305 College Road
East, Princeton, New Jersey 08540 which is occupied pursuant to a lease which expires on November 30, 2025.
Item
3. Legal Proceedings.
The
information required under this item is set forth in Footnote 10. Commitments and Contingencies – Legal Proceedings with
this Form 10-K and is incorporated herein by reference.
Item
4. Mine Safety Disclosures.
None.
NOTES
TO FINANCIAL STATEMENTS
1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Advaxis,
Inc. (“Advaxis” or the “Company”) is a late-stage biotechnology Company focused on the discovery, development
and commercialization of proprietary
Lm
Technology antigen delivery products based on a platform technology that utilizes
live attenuated
Listeria monocytogenes
(“
Lm
”) bioengineered to secrete antigen/adjuvant fusion proteins.
These
Lm
-based strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions
into a single immunotherapy by accessing and directing antigen presenting cells to stimulate anti-tumor T cell immunity, stimulate
and activate the immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the Tumor
Microenvironment (“TME”) to enable the T cells to eliminate tumors. The Company believes that
Lm
Technology
immunotherapies can complement and address significant unmet needs in the current oncology treatment landscape. Specifically,
their product candidates have the potential to optimize checkpoint performance, while having a generally well-tolerated safety
profile, and most of their product candidates are immediately available for treatment with a low cost of goods. The Company’s
passion for the clinical potential of
Lm
Technology is balanced by focus and fiscal discipline and driven towards increasing
shareholder value.
Advaxis
is focused on four franchises in various stages of clinical and pre-clinical development, which they believe will provide the
greatest opportunity to have a significant impact on patients and their families:
|
·
|
Human
Papilloma Virus (“HPV”)-associated cancers
|
|
·
|
Disease
focused hotspot / cancer antigen therapies
|
All
four clinical franchises are anchored in the Company’s
Lm
Technology
TM
, a unique platform designed for
its ability to safely and effectively target various cancers in multiple ways. As an intracellular bacterium,
Lm
is an
effective vector for the presentation of antigens through both the Major Histocompatibility Complex (“MHC”) I and
II pathways, due to its active phagocytosis by Antigen Presenting Cells (“APCs”). Within the APCs,
Lm
produces
virulence factors which allow survival in the host cytosol and potently stimulate the immune system.
Liquidity and Financial Condition
The
Company’s products that are being developed have not generated significant revenue. As a result, the Company has suffered
recurring losses. These losses are expected to continue for an extended period of time. Our major sources of cash have been proceeds
from various public and private offerings of our common stock, option and warrant exercises, and interest income. From October
2013 through October 2017, we raised approximately $222.5 million in gross proceeds from various public and private offerings
of our common stock.
As
of October 31, 2017, the Company had approximately $70.9 million in cash, restricted cash, cash equivalents and investments on
its balance sheet. The Company plans to continue to be disciplined in regards to its utilization of its capital and anticipates
its cash burn will decrease from fiscal 2017. This decrease will largely be due to several one-time items in fiscal 2017 related
to the preparation of our MAA filing of axalimogene filolisbac and other one-time costs that the Company does not anticipate to
recur. We believe our current cash position is sufficient to fund our business plan into fiscal 2019. The actual amount of cash
that we will need to operate is subject to many factors.
The Company also
recognizes it may need to raise additional capital in order to continue to execute its business plan. There is no assurance
that additional financing will be available when needed or that management will be able to obtain financing on terms
acceptable to the Company or whether the Company will become profitable and generate positive operating cash flow. If the
Company is unable to raise sufficient additional funds, it will have to scale back its operations.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Estimates are used when accounting for such items as the fair value and recoverability of the carrying
value of property and equipment and intangible assets (patents and licenses), the fair value of options, the fair value of embedded
conversion features, warrants and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, based on historical experience and on various other assumptions that it believes to be reasonable under the circumstances.
Actual results may or may not differ from estimates.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial
statements. These reclassifications had no effect on the previously reported net loss.
Collaboration
Agreements
The
Company evaluates whether an arrangement is a collaborative arrangement under the Financial Accounting Standards Board (the “FASB”)
Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements, at its inception based on the facts
and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify
as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure
to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements
where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties
are recorded on a gross basis in the financial statements.
From
time to time, the Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization
of products and product candidates. These collaborations generally provide for non-refundable, upfront license fees, research
and development and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. The Company’s
collaboration agreements with third parties are performed on a ‘‘best efforts’’ basis with no guarantee
of either technological or commercial success.
Revenue
Recognition
The
Company is expected to derive the majority of its revenue from patent licensing and research and development services associated
with patent licensing. In general, these revenue arrangements provide for the payment of contractually determined fees in consideration
for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. The intellectual
property rights granted may be perpetual in nature, or upon the final milestones being met, or can be granted for a defined, relatively
short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an
additional minimum upfront payment. The Company recognizes licensing fees when there is persuasive evidence of a licensing arrangement,
fees are fixed or determinable, delivery has occurred and collectability is reasonably assured.
Revenue
associated with nonrefundable upfront license fees under arrangements where the license fees and research and development activities
cannot be accounted for as separate units of accounting is deferred and recognized as revenue on a straight-line basis over the
expected period of performance.
Revenues
from the achievement of research and development milestones, if deemed substantive, are recognized as revenue when the milestones
are achieved and the milestone payments are due and collectible. If not deemed substantive, the Company recognizes such milestones
as revenue on a straight-line basis over the remaining expected performance period under the arrangement. All such recognized
revenues are included in collaborative licensing and development revenue in the Company’s statements of operations.
Milestones
are considered substantive if all of the following conditions are met: (1) the milestone is nonrefundable; (2) achievement of
the milestone was not reasonably assured at the inception of the arrangement; (3) substantive effort is involved to achieve the
milestone; and (4) the amount of the milestone appears reasonable in relation to the effort expended, and the other milestones
in the arrangement and the related risk associated with the achievement of the milestone and any ongoing research and development
or other services are priced at fair value.
If
product development is successful, the Company will recognize revenue from royalties based on licensees’ sales of its products
or products using its technologies. Royalties are recognized as earned in accordance with the contract terms when royalties from
licensees can be reasonably estimated and collectability is reasonably assured. If royalties cannot be reasonably estimated or
collectability of a royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is received.
Deferred
revenue represents the portion of payments received for which the earnings process has not been completed. Deferred revenue expected
to be recognized within the next 12 months is classified as a current liability.
An
allowance for doubtful accounts is established based on the Company’s best estimate of the amount of probable credit losses
in the Company’s existing license fee receivables, using historical experience. The Company reviews its allowance for doubtful
accounts periodically. Past due accounts are reviewed individually for collectability. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date,
this is yet to occur.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to
be cash equivalents.
Restricted
Cash and Letter of Credit
During
2017, the Company established a letter of credit with a financial institution as security for the purchase of custom equipment.
The letter of credit is collateralized by cash which is unavailable for withdrawal or for usage for general obligations. No amount
is outstanding under the letter of credit as of October 31, 2017.
Concentration
of Credit Risk
The
Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits. Approximately $23.1
million is subject to credit risk at October 31, 2017. However, these cash balances are maintained at creditworthy financial institutions.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
Investments
Investment
securities consist of certificates of deposit, domestic governmental agency loans, and U.S. treasury notes. The Company classifies
these securities as held-to-maturity. Held-to-maturity securities are those securities in which the Company has the ability and
intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion
of premiums or discounts. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security
as an adjustment to yield using the effective interest method.
A
decline in the market value of any investment security below cost, that is deemed to be other than temporary, results in a reduction
in the carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is established.
Other-than-temporary impairment charges are included in Other Income (Expense), net. The Company did not recognize any impairment
charges during the years ended October 31, 2017, 2016 or 2015. Interest income is recognized when earned.
Deferred
Expenses
Deferred
expenses consist of advanced payments made on research and development projects. Expense is recognized in the Statement of Operations
as the research and development activity is performed.
Property
and Equipment
Property and equipment
is stated at cost. Additions and improvements that extend the lives of the assets are capitalized, while expenditures for repairs
and maintenance are expensed as incurred. Leasehold improvements are amortized on a straight-line basis over the shorter of the
asset’s estimated useful life or the remaining lease term. Depreciation is calculated on a straight-line basis over
the estimated useful lives of the assets ranging from three to ten years.
When
depreciable assets are retired or sold the cost and related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in operations.
Intangible
Assets
Intangible
assets are recorded at cost and include patents and patent application costs, licenses and software. Intangible assets are amortized
on a straight-line basis over their estimated useful lives ranging from 3 to 20 years. Patent application costs are written-off
if the application is rejected, withdrawn or abandoned.
Impairment
of Long-Lived Assets
The
company reviews its long-lived assets, including property and equipment and intangible assets, for impairment whenever events
and circumstances indicate that the carrying value of an asset might not be recoverable. Recoverability of assets held and used
is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from
the use of the asset and its eventual disposition.
If the total of the undiscounted future
cash flows is less than the carrying amount of those assets, an impairment loss is recognized in the Statement of Operations based
on the excess of the carrying amount over the fair value of the asset
.
Net
Income (Loss) per Share
Basic
net income or loss per common share is computed by dividing net income or loss available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted earnings per share give effect to dilutive options, warrants,
convertible debt and other potential Common Stock outstanding during the period. In the case of a net loss the impact of the potential
Common Stock resulting from warrants, outstanding stock options and convertible debt are not included in the computation of diluted
loss per share, as the effect would be anti-dilutive. In the case of net income, the impact of the potential Common Stock resulting
from these instruments that have intrinsic value are included in the diluted earnings per share. The table sets forth the number
of potential shares of Common Stock that have been excluded from diluted net loss per share.
|
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As
of October 31,
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2017
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2016
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|
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2015
|
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Warrants
|
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3,092,935
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3,110,575
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3,241,466
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Stock
options
|
|
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3,893,558
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|
|
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3,351,795
|
|
|
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1,981,939
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|
Restricted
stock units
|
|
|
1,363,119
|
|
|
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719,448
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|
|
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1,069,335
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Convertible
debt (using the if-converted method)
|
|
|
-
|
|
|
|
-
|
|
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1,576
|
|
Total
|
|
|
8,349,612
|
|
|
|
7,181,818
|
|
|
|
6,294,316
|
|
Research
and Development Expenses
Research
and development costs are expensed as incurred and include but are not limited to clinical trial and related manufacturing costs,
payroll and personnel expenses, lab expenses, and related overhead costs.
Stock
Based Compensation
The
Company has an equity plan which allows for the granting of stock options to its employees, directors and consultants for a fixed
number of shares with an exercise price equal to the fair value of the shares at date of grant. The Company measures the cost
of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors,
the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally measured
based on contractual terms. The fair value amount is then recognized over the requisite service period, usually the vesting period,
in both research and development expenses and general and administrative expenses on the statement of operations, depending on
the nature of the services provided by the employees or consultants.
The
process of estimating the fair value of stock-based compensation awards and recognizing stock-based compensation cost over their
requisite service period involves significant assumptions and judgments. The Company estimates the fair value of stock option
awards on the date of grant using the Black Scholes Model (“BSM”) for the remaining awards, which requires that the
Company makes certain assumptions regarding: (i) the expected volatility in the market price of its Common Stock; (ii) dividend
yield; (iii) risk-free interest rates; and (iv) the period of time employees are expected to hold the award prior to exercise
(referred to as the expected holding period). As a result, if the Company revises its assumptions and estimates, stock-based compensation
expense could change materially for future grants.
The
Company accounts for stock-based compensation using fair value recognition and records forfeitures as they occur. As such, the
Company recognizes stock-based compensation cost only for those stock-based awards that vest over their requisite service period,
based on the vesting provisions of the individual grants.
Treasury
Stock
The
Company accounts for repurchases of common stock and shares withheld in lieu of taxes when restricted stock vests using the cost
method with common stock in treasury classified in the balance sheet as a reduction in shareholders’ equity.
Fair
Value of Financial Instruments
The carrying value of financial
instruments, including cash and cash equivalents, restricted cash and accounts payable approximated fair value as of the balance
sheet date presented, due to their short maturities. The carrying amounts of financing arrangements issued approximate fair value
as of the balance sheet date presented, because interest rates on these instruments approximate market interest rates after consideration
of stated interest rates, anti-dilution protection and associated warrants.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates
all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements
of operations. For stock-based derivative financial instruments, the Company used the Black Scholes valuation model which approximated
the binomial lattice options pricing model to value the derivative instruments at inception and on subsequent valuation dates.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,
is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current
based on whether or not net-cash settlement of the instrument could be required within 12 months of the balance sheet date.
Income
Taxes
The
Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.”
Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and
(ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available
positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
Recent
Accounting Pronouncements
In
May 2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial Reporting Standards,
the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers, which is a new standard related to revenue recognition. Under the new standard, recognition
of revenue occurs when a customer obtains control of promised services or goods in an amount that reflects the consideration to
which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of
the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. The standard must be adopted
using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach.
In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, which defers
the implementation of this new standard to be effective for fiscal years beginning after December 15, 2017. Early adoption is
permitted effective January 1, 2017. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations, which
clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard pursuant
to ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, and in May 2016,
the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, which amend certain aspects of the new revenue
recognition standard pursuant to ASU 2014-09. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements
to Topic 606, Revenue from Contracts with Customers to clarify the codification or to correct unintended application of guidance.
In September and November 2017 , the FASB issued ASU 2017-13 , Revenue Recognition (Topic 605), Revenue from Contracts with Customers
(Topic 606), Leases (Topic 840), and Leases (Topic 842) and ASU 2017-14, Income Statement—Reporting Comprehensive Income
(Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) which amends certain aspects
of the new revenue recognition standard The Company is currently evaluating which transition approach we will utilize and the
impact of adopting this accounting standard on the Company’s financial statements.
In August 2014, the FASB
issued ASU 2014-15, Disclosures of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The new standard
provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years,
and interim periods within those fiscal years, ending after December 15, 2016. The Company has adopted this standard effective
for the year ending October 31, 2017. There was no impact on the Company’s financial statements.
In
February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The standard amends the existing accounting standards
for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes
to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of fiscal 2020. Early adoption of ASU
2016-02 is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at,
or entered into after, the date of initial application, with an option to use certain transition relief. In September, the
FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),
and Leases (Topic 842) which amends certain aspects of the new lease standard. The Company is currently evaluating the impact
of adopting ASU 2016-02 on the Company’s financial statements.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard changes the
presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents
will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown
on the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2017. Early adoption is permitted. This ASU is not expected to have a material impact on the Company’s
financial statements.
In
January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.”
The amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The amendments in this Update
provide a screen to determine when a set is not a business. If the screen is not met, it (1) requires that to be considered a
business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability
to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. This Update
is the final version of Proposed ASU 2015-330 Business Combinations (Topic 805) – Clarifying The Definition of a Business,
which has been deleted. The amendments in this Update are effective for all entities for annual periods, and interim periods within
those annual periods, beginning after December 15, 2017. Early adoption is permitted. This ASU is not expected to have a material
impact on the Company’s financial statements.
In
May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”
to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,
Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in
this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to
apply modification accounting in Topic 718. This Update is the final version of Proposed ASU 2016-360—Compensation—Stock
Compensation (Topic 718)—Scope of Modification Accounting, which has been deleted. The amendments in this Update are effective
for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early
adoption is permitted. This ASU is not expected to have a material impact on the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
impact on the accompanying consolidated financial statements.
3.
INVESTMENTS
The
following table summarizes the Company’s investment securities at amortized cost as of October 31, 2017 and 2016:
|
|
October
31, 2017
|
|
|
|
Amortized
Cost,
as Adjusted
|
|
|
Gross
Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding Losses
|
|
|
Estimated
Fair
Value
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of Deposit
|
|
$
|
11,391,147
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,391,147
|
|
Domestic
Governmental Agency Loans
|
|
|
499,957
|
|
|
|
-
|
|
|
|
162
|
|
|
|
499,795
|
|
U.S
Treasury Notes
|
|
|
34,507,200
|
|
|
|
-
|
|
|
|
25
,351
|
|
|
|
34,481,849
|
|
Total
short-term investment securities
|
|
$
|
46,398,304
|
|
|
$
|
-
|
|
|
$
|
25
,513
|
|
|
$
|
46,372,791
|
|
|
|
October
31, 2016
|
|
|
|
Amortized
Cost,
as Adjusted
|
|
|
Gross
Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding Losses
|
|
|
Estimated
Fair
Value
|
|
Short-term
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of Deposit
|
|
$
|
10,737,563
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,737,563
|
|
Domestic
Governmental Agency Loans
|
|
|
2,500,000
|
|
|
|
-
|
|
|
|
250
|
|
|
|
2,499,750
|
|
U.S
Treasury Notes
|
|
|
26,098,985
|
|
|
|
2,404
|
|
|
|
7,556
|
|
|
|
26,093,833
|
|
Total
short-term investment securities
|
|
$
|
39,336,548
|
|
|
$
|
2,404
|
|
|
$
|
7,806
|
|
|
$
|
39,331,146
|
|
All
of the Company’s investments mature within the next 12 months.
4.
PROPERTY AND EQUIPMENT
Property
and equipment consists of the following:
|
|
October
31,
|
|
|
|
2017
|
|
|
2016
|
|
Leasehold
improvements
|
|
$
|
2,167,990
|
|
|
$
|
1,835,602
|
|
Laboratory
equipment
|
|
|
4,381,428
|
|
|
|
2,038,704
|
|
Furniture
and fixtures
|
|
|
728,725
|
|
|
|
549,025
|
|
Computer
equipment
|
|
|
394,523
|
|
|
|
240,910
|
|
Construction
in progress
|
|
|
645,000
|
|
|
|
151,368
|
|
Total
property and equipment
|
|
|
8,317,666
|
|
|
|
4,815,609
|
|
Accumulated
depreciation and amortization
|
|
|
(1,206,585
|
)
|
|
|
(426,535
|
)
|
Net
property and equipment
|
|
$
|
7,111,081
|
|
|
$
|
4,389,074
|
|
Depreciation
expense for the years ended October 31, 2017, 2016 and 2015 was $790,554, $283,538 and $59,033, respectively.
5.
INTANGIBLE ASSETS
Intangible
assets consist of the following:
|
|
October
31,
|
|
|
|
2017
|
|
|
2016
|
|
Patents
|
|
$
|
5,727,298
|
|
|
$
|
4,980,610
|
|
License
|
|
|
776,992
|
|
|
|
776,992
|
|
Software
|
|
|
108,604
|
|
|
|
19,625
|
|
Total
intangibles
|
|
|
6,612,894
|
|
|
|
5,777,227
|
|
Accumulated
amortization
|
|
|
(1,756,119
|
)
|
|
|
(1,448,106
|
)
|
Net
intangible assets
|
|
$
|
4,856,775
|
|
|
$
|
4,329,121
|
|
The
expirations of the existing patents range from 2017 to 2038 but the expirations can be extended based on market approval if granted
and/or based on existing laws and regulations. Capitalized costs associated with patent applications that are abandoned without
future value are charged to expense when the determination is made not to pursue the application. Patent applications having a
net book value of $315,394, $0 and $28,480 and were abandoned and were charged to research and development expenses in the Statement
of Operations for the years ended October 31, 2017, 2016 and 2015, respectively. Amortization expense for intangible assets is
included in general and administrative expenses and aggregated $329,866, $252,654 and $206,357 for the years ended October 31,
2017, 2016 and 2015, respectively.
At
October 31, 2017, the estimated amortization expense by fiscal year based on the current carrying value of intangible assets is
as follows:
2018
|
|
$
|
365,848
|
|
2019
|
|
|
363,448
|
|
2020
|
|
|
346,593
|
|
2021
|
|
|
329,647
|
|
2022
|
|
|
329,647
|
|
Thereafter
|
|
|
3,121,592
|
|
Total
|
|
$
|
4,856,775
|
|
6.
ACCRUED EXPENSES:
The
following table represents the major components of accrued expenses:
|
|
October
31,
|
|
|
|
2017
|
|
|
2016
|
|
Salaries
and other compensation
|
|
$
|
2,652,583
|
|
|
$
|
2,467,650
|
|
Vendors
|
|
|
2,811,956
|
|
|
|
2,098,792
|
|
Professional
fees
|
|
|
3,235,497
|
|
|
|
6,338,561
|
|
Total
accrued expenses
|
|
$
|
8,700,036
|
|
|
$
|
10,905,003
|
|
7.
COMMON STOCK PURCHASE WARRANTS AND WARRANT LIABILITY
Warrants
A
summary of warrant activity was as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual Life
In Years
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
and exercisable warrants at October 31, 2014
|
|
|
4,158,092
|
|
|
$
|
5.43
|
|
|
|
3.94
|
|
|
$
|
9,518
|
|
Issued
|
|
|
2,361
|
|
|
|
7.20
|
|
|
|
|
|
|
|
|
|
Exercised
*
|
|
|
(769,349
|
)
|
|
|
5.12
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(149,638
|
)
|
|
|
14.61
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable warrants at October 31, 2015
|
|
|
3,241,466
|
|
|
$
|
5.07
|
|
|
|
2.90
|
|
|
$
|
19,588,099
|
|
Exercised
|
|
|
(122,661
|
)
|
|
|
5.01
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(8,230
|
)
|
|
|
18.75
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable warrants at October 31, 2016
|
|
|
3,110,575
|
|
|
$
|
5.04
|
|
|
|
1.91
|
|
|
$
|
9,558,159
|
|
Exercised
|
|
|
(225
|
)
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(17,955
|
)
|
|
|
11.43
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable warrants at October 31, 2017
|
|
|
3,092,395
|
|
|
$
|
5.00
|
|
|
|
0.92
|
|
|
$
|
-
|
|
*
Includes the cashless exercise of 300,376 warrants that resulted in the issuance of 222,295 shares of common stock.
At
October 31, 2017, the Company had all of its total 3.09 million outstanding warrants classified as equity (equity warrants). At
October 31, 2016, the Company had approximately 3.09 million of its total 3.11 million outstanding warrants classified as equity.
At October 31, 2015, the Company had approximately 3.22 million of its total 3.24 million outstanding warrants classified as equity.
At issuance, equity warrants are recorded at their relative fair values, using the Relative Fair Value Method, in the shareholders
equity section of the balance sheet. The Company’s equity warrants can only be settled through the issuance of shares and
are not subject to anti-dilution provisions.
Warrant
Liability
At
October 31, 2017, the Company had no warrants classified as liabilities (liability warrants), as all of the liability warrants
expired. At October 31, 2016, the Company had approximately 18,000 of its total 3.11 million outstanding warrants classified as
liabilities. At October 31, 2015, the Company had approximately 18,000 of its total 3.24 million outstanding warrants classified
as liabilities. The Company utilizes the BSM to calculate the fair value of these warrants at issuance and at each subsequent
reporting date. For those warrants with exercise price reset features (anti-dilution provisions), the Company computes multiple
valuations, each quarter, using an adjusted BSM, to account for the various possibilities that could occur due to changes in the
inputs to the BSM as a result of contractually-obligated changes (for example, changes in strike price to account for down-round
provisions). The Company effectively weights each calculation based on the likelihood of occurrence to determine the value of
the warrants at the reporting date. As of October 31, 2015, all of the liability warrants that were subject to weighted-average
anti-dilution provisions had expired. The remaining liability warrants contain a cash settlement provision in the event of a fundamental
transaction (as defined in the Common Stock purchase warrant). Any changes in the fair value of the warrant liability (i.e. -
the total fair value of all outstanding liability warrants at the balance sheet date) between reporting periods will be reported
on the statement of operations.
At
October 31, 2017 and October 31, 2016, the fair value of the warrant liability was $0 and $20,156, respectively and is reflected
in other current liabilities in the Balance Sheet. For the years ended October 31, 2017, 2016 and 2015, the Company reported income
of $20,156, income of $69,055 and a loss of $48,950, respectively, due to changes in the fair value of the warrant
liability.
In
fair valuing the warrant liability, at October 31, 2016 and 2015, the Company used the following inputs in its BSM:
|
|
10/31/2016
|
|
|
10/31/2015
|
|
Exercise price
|
|
$
|
10.63-18.75
|
|
|
$
|
10.63-18.75
|
|
Stock
price
|
|
$
|
8.09
|
|
|
$
|
11.09
|
|
Expected
term
|
|
|
0.55-0.75
years
|
|
|
|
1.52-1.76
years
|
|
Volatility
%
|
|
|
81.84%-87.09
|
%
|
|
|
93.87%-95.00
|
%
|
Risk
free rate
|
|
|
0.51%-0.66
|
%
|
|
|
.075
|
%
|
Warrants
with anti-dilution provisions
Some
of the Company’s warrants contained anti-dilution provisions originally set at an exercise price of $25.00 with a term of
five years. As of October 31, 2015, all of these warrants had expired. If the Company had issued any Common Stock, except for
exempt issuances as defined in the warrant agreement, for consideration less than the exercise price, then the exercise price
and the amount of warrant shares available would have been adjusted to a new price and amount of shares per the “weighted
average” formula included in the warrant agreement. For the year ended October 31, 2015, this anti-dilution provision required
the Company to issue approximately 2,400 additional warrant shares, and the exercise price to be lowered to $7.20.
For
those warrants with exercise price reset features (anti-dilution provisions), the Company computed multiple valuations, each quarter,
using an adjusted BSM, to account for the various possibilities that could occur due to changes in the inputs to the BSM as a
result of contractually-obligated changes (for example, changes in strike price to account for down-round provisions). The Company
utilized different exercise prices of $7.20 and $6.00, weighting the possibility of warrants being exercised at $7.20 between
40% and 50% and warrants being exercised at $6.00 between 50% and 60%.
8.
SHARE BASED COMPENSATION
The
following table summarizes share-based compensation expense included in the Statement of Operations by expense category for the
years ended October 31, 2017, 2016 and 2015, respectively:
|
|
Year
Ended October 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Research
and development
|
|
$
|
5,647,913
|
|
|
$
|
7,985,651
|
|
|
$
|
6,293,791
|
|
General
and administrative
|
|
|
22,187,760
|
|
|
|
15,487,296
|
|
|
|
15,137,239
|
|
Total
|
|
$
|
27,835,673
|
|
|
$
|
23,472,947
|
|
|
$
|
21,431,030
|
|
Amendments
The
Advaxis, Inc. 2015 Incentive Plan (the “2015 Plan”) was originally ratified and approved by the Company’s stockholders
on May 27, 2015. Subject to proportionate adjustment in the event of stock splits and similar events, the aggregate number of
shares of Common Stock that may be issued under the 2015 Plan is 3,600,000 shares, plus a number of additional shares (not to
exceed 650,000) underlying awards outstanding as of the effective date of the 2015 Plan under the prior plan that thereafter
terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason.
At
the Annual Meeting of Stockholders of the Company held on March 10, 2016, the stockholders ratified and approved an amendment
to the 2015 Plan to increase the aggregate number of shares of common stock authorized for issuance under such plan from 3,600,000
shares to 4,600,000 shares. Furthermore, the stockholders approved an amendment to the Company’s Certificate of Incorporation
to increase the total number of authorized shares of common stock from 45,000,000 shares of common stock to 65,000,000 shares
of common stock.
At
the Annual Meeting of Stockholders of the Company held on April 5, 2017, the stockholders ratified and approved an amendment to
the 2015 Plan to increase the aggregate number of shares of common stock authorized for issuance under such plan from 4,600,000
shares to 6,100,000 shares. The amendment also included a provision that provides for pre-defined annual increases in the number
of shares available for issuance under the Plan equal to the lesser of: (i) 5% of the total number of shares of Common Stock outstanding,
(ii) 2,500,000, or (iii) a lesser number determined by the Board of Directors. As of October 31, 2017, there were 710,853 shares
available for issuance under the 2015 Plan.
Restricted
Stock Units (RSUs)
A
summary of the Company’s RSU activity and related information for the year ended October 31, 2017, 2016 and 2015 is as follows:
|
|
Number
of
RSU’s
|
|
|
Weighted-Average
Grant Date Fair Value
|
|
Balance
at October 31, 2014:
|
|
|
791,879
|
|
|
$
|
3.81
|
|
Granted
|
|
|
864,192
|
|
|
|
15.14
|
|
Vested
|
|
|
(583,403
|
)
|
|
|
7.58
|
|
Cancelled
|
|
|
(3,333
|
)
|
|
|
11.76
|
|
Balance at
October 31, 2015:
|
|
|
1,069,335
|
|
|
$
|
10.89
|
|
Granted
|
|
|
695,040
|
|
|
|
9.31
|
|
Vested
|
|
|
(824,317
|
)
|
|
|
8.35
|
|
Cancelled
|
|
|
(220,610
|
)
|
|
|
15.81
|
|
Balance at
October 31, 2016
|
|
|
719,448
|
|
|
$
|
10.77
|
|
Granted
|
|
|
1,632,134
|
|
|
|
7.90
|
|
Vested
|
|
|
(877,383
|
)
|
|
|
9.15
|
|
Cancelled
|
|
|
(111,080
|
)
|
|
|
8.74
|
|
Balance
at October 31, 2017
|
|
|
1,363,119
|
|
|
$
|
8.54
|
|
The
fair value as of the respective vesting dates of RSUs was approximately $6,045,000, $6,643,000 and $7,771,000 for the years ended
October 31, 2017, 2016 and 2015, respectively.
As
of October 31, 2017, there was approximately $9,434,000 of unrecognized compensation cost related to non-vested RSUs, which is
expected to be recognized over a remaining weighted average vesting period of approximately 1.99 years.
As
of October 31, 2017, the aggregate intrinsic value of non-vested RSUs was approximately $4,635,000.
Employee
Stock Awards
Common
Stock issued to executives and employees related to vested incentive retention awards, employment inducements, management purchases
and employee excellence awards totaled 878,948 shares (834,600 shares on a net basis after employee taxes), 719,610 shares (712,106
shares on a net basis after employee taxes), and 506,736 shares (422,781 shares on a net basis after employee taxes) during the
years ended October 31, 2017, 2016 and 2015, respectively. Total stock compensation expense associated with these awards for the
years ended October 31, 2017, 2016 and 2015 was $8,883,123, $5,458,823 and $5,432,494, respectively.
Furthermore,
during the year ended October 31, 2015, non-executive employees were entitled to receive a performance-based year-end cash bonus.
Several non-executive employees voluntarily requested to be paid all or a portion of their cash bonus in the Company’s common
stock instead of cash. During the year ended October 31, 2015, the total fair value of these equity purchases were $102,022, or
9,150 shares of the Company’s Common Stock.
Director
Stock Awards
During the years ended
October 31, 2017, 2016 and 2015, common stock issued to the Directors for compensation related to board and committee membership
was 30,000 shares, 152,386 shares and 267,186, respectively. During the years ended October 31, 2017, 2016 and 2015, total stock
compensation expense to the Directors was $403,200, $1,184,780 and $1,223,118, respectively.
Stock
Options
A
summary of changes in the stock option plan for the years ended October 31, 2017, 2016 and 2015 is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual Life
In Years
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
as of October 31, 2014
|
|
|
467,968
|
|
|
$
|
15.51
|
|
|
|
6.34
|
|
|
$
|
-
|
|
Granted
|
|
|
1,668,995
|
|
|
|
13.41
|
|
|
|
|
|
|
|
|
|
Exercised
*
|
|
|
(137,667
|
)
|
|
|
12.29
|
|
|
|
|
|
|
|
|
|
Cancelled
or expired
|
|
|
(17,357
|
)
|
|
|
36.24
|
|
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2015
|
|
|
1,981,939
|
|
|
$
|
13.78
|
|
|
|
8.72
|
|
|
$
|
285,330
|
|
Granted
|
|
|
1,385,000
|
|
|
|
12.81
|
|
|
|
|
|
|
|
|
|
Cancelled
or expired
|
|
|
(15,144
|
)
|
|
|
29.69
|
|
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2016
|
|
|
3,351,795
|
|
|
$
|
13.31
|
|
|
|
7.82
|
|
|
$
|
61,980
|
|
Granted
|
|
|
556,952
|
|
|
|
7.71
|
|
|
|
|
|
|
|
|
|
Cancelled
or expired
|
|
|
(15,189
|
)
|
|
|
14.07
|
|
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2017
|
|
|
3,893,558
|
|
|
$
|
12.51
|
|
|
|
5.72
|
|
|
$
|
-
|
|
Vested
and exercisable at October 31, 2017
|
|
|
2,795,826
|
|
|
$
|
13.05
|
|
|
|
4.80
|
|
|
$
|
-
|
|
*
Includes the cashless exercise of 117,667 options that resulted in the issuance of 45,167 shares of common stock.
The
following table summarizes information about the outstanding and exercisable options at October 31, 2017;
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
Exercise
|
|
Number
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
Number
|
|
|
Remaining
|
|
|
Exercise
|
|
|
Intrinsic
|
|
Price
Range
|
|
Outstanding
|
|
|
Contractual
|
|
|
Price
|
|
|
Value
|
|
|
Exercisable
|
|
|
Contractual
|
|
|
Price
|
|
|
Value
|
|
$3.63
- $9.99
|
|
|
672,672
|
|
|
|
6.58
|
|
|
$
|
7.91
|
|
|
$
|
61,980
|
|
|
|
285,954
|
|
|
|
4.02
|
|
|
$
|
8.19
|
|
|
$
|
-
|
|
$10.00 - $14.99
|
|
|
3,006,606
|
|
|
|
5.63
|
|
|
$
|
13.14
|
|
|
$
|
-
|
|
|
|
2,295,592
|
|
|
|
4.95
|
|
|
$
|
13.18
|
|
|
$
|
-
|
|
$15.01 - $19.99
|
|
|
213,480
|
|
|
|
4.29
|
|
|
$
|
18.07
|
|
|
$
|
-
|
|
|
|
213.480
|
|
|
|
4.29
|
|
|
$
|
18.07
|
|
|
$
|
-
|
|
$20.00 - $21.25
|
|
|
800
|
|
|
|
2.60
|
|
|
$
|
21.25
|
|
|
$
|
-
|
|
|
|
800
|
|
|
|
2.60
|
|
|
$
|
21.25
|
|
|
$
|
-
|
|
The
fair value of each option granted from the Company’s stock option plans during the years ended October 31, 2017, 2016 and
2015 was estimated on the date of grant using the Black-Scholes option-pricing model. Using this model, fair value is calculated
based on assumptions with respect to (i) expected volatility of the Company’s Common Stock price, (ii) the periods of time
over which employees and Board Directors are expected to hold their options prior to exercise (expected lives), (iii) expected
dividend yield on the Company’s Common Stock, and (iv) risk-free interest rates, which are based on quoted U.S. Treasury
rates for securities with maturities approximating expected lives of the options. The Company used their own historical volatility
in determining the volatility to be used. The expected term of the stock option grants was calculated using the “simplified”
method in accordance with the SEC Staff Accounting Bulletin 107. The “simplified” method was used since the Company
believes its historical data does not provide a reasonable basis upon which to estimate expected term and the Company does not
have enough option exercise data from its grants issued to support its own estimate as a result of vesting terms and changes in
the stock price. The expected dividend yield is zero as the Company has never paid dividends to common shareholders and does not
currently anticipate paying any in the foreseeable future.
The
following table provides the weighted average fair value of options granted to directors and employees and the related assumptions
used in the Black-Scholes model:
|
|
Year
Ended
|
|
|
|
October
31, 2017
|
|
|
October
31, 2016
|
|
|
October
31, 2015
|
|
Weighted
average fair value of options granted
|
|
$
|
6.36
|
|
|
$
|
10.71
|
|
|
$
|
17.38
|
|
Expected
term
|
|
|
5.50-6.50
years
|
|
|
|
5.51-6.51
years
|
|
|
|
5-10
years
|
|
Expected
volatility
|
|
|
107.07%-110.93
|
%
|
|
|
109.23%-115.25
|
%
|
|
|
109.26%-154.54
|
%
|
Expected
dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk
free interest rate
|
|
|
1.26%-1.58
|
%
|
|
|
1.65-2.00
|
%
|
|
|
1.41%-2.27
|
%
|
Total
compensation cost related to the Company’s outstanding stock options, recognized in the statement of operations for the
years ended October 31, 2017, 2016 and 2015 was approximately $17,195,000, $15,223,000 and $9,521,000, respectively. Included
in compensation expense is $1,641,000 recognized as a result of the modification of certain option agreements associated with
the resignation of the Company’s Chief Executive Officer in July 2017. Pursuant to the separation agreement all the outstanding
options vested immediately and the expiration date was extended until July 5, 2021.
During
the year ended October 31, 2017, 556,952 options were granted with a total grant date fair value of approximately $3,542,000.
During the year ended October 31, 2016, 1,385,000 options were granted with a total grant date fair value of approximately $14,838,000.
During the year ended October 31, 2015, 1,668,995 options were granted with a total grant date fair value of approximately $29,014,000.
As
of October 31, 2017, there was approximately $4,680,000 of unrecognized compensation cost related to non-vested stock option awards,
which is expected to be recognized over a remaining weighted average vesting period of approximately 1.11 years.
Shares
Issued to Consultants
During
the year ended October 31, 2017, 165,907 shares of Common Stock valued at $1,384,350 were issued to consultants for services.
The Company recorded a liability on its balance sheet for $45,000 for shares earned pursuant to consulting agreements but not
delivered. The common stock share values were based on the dates the shares vested.
During
the year ended October 31, 2016, 168,885 shares of Common Stock valued at $1,565,888 were issued to consultants for services.
The Company recorded a liability on its balance sheet for $75,000 for shares earned pursuant to consulting agreements but not
delivered. The common stock share values were based on the dates the shares vested.
During
the year ended October 31, 2015, 378,538 shares of Common Stock valued at $4,707,440 were issued to consultants for services.
The Company recorded a liability on its balance sheet for $55,000 for shares earned pursuant to consulting agreements but not
delivered. The common stock share values were based on the dates the shares vested.
2011
Employee Stock Purchase Plan
The
Advaxis, Inc. 2011 Employee Stock Purchase Plan (“ESPP”) was approved by the Company’s shareholders in September
2011. The ESPP allows employees to purchase Common Stock of the Company at a 15% discount to the market price on designated exercise
dates. Employees were eligible to participate in the ESPP beginning December 30, 2011. 40,000 shares of the Company’s Common
Stock are reserved for issuance under the ESPP.
During
the year ended October 31, 2017, 2016 and 2015 shares purchased under the ESPP were 26,594, 6,627 and 7,063 and the Company recorded
expense of $251,374, $73,244 and $28,791 respectively. As of October 31, 2017, 0 shares of Company’s Common Stock remain
available for issuance under the ESPP.
9.
COLLABORATION AND LICENSING AGREEMENTS
BMS
On
May 30, 2017, the Company announced a clinical development collaboration with BMS to evaluate ADXS-DUAL, its second investigational
immunotherapy targeting HPV-associated cancers, and BMS’ PD-1 immune checkpoint inhibitor, Opdivo ® (nivolumab), as
a potential combination treatment option for women with metastatic cervical cancer.
Under
the terms of the agreement, each party will bear their own internal costs and provide its immunotherapy agent. The Company will
sponsor the trial and pay third-party costs.
Sellas
Life Science Group
On
February 27, 2017, the Company entered into a license agreement with Sellas Life Science Group (“Sellas”) to develop
a novel cancer immunotherapy agent using Advaxis’ proprietary
Lm
-based antigen delivery product with SELLAS’
patented WT1 targeted heteroclitic peptide antigen mixture (galinpepimut-S)). Pursuant to the agreement, Advaxis will conduct
all pre-clinical activities required for an IND filing and Sellas will be responsible for all clinical development and commercial
activities. Advaxis will receive future payments of up to $358 million from SELLAS if certain development, regulatory, and commercial
milestones are met. SELLAS has agreed to pay Advaxis single-digit to low double-digit royalties based on worldwide net sales upon
commercialization. If SELLAS sublicenses its rights, Advaxis will receive a percentage of applicable sublicense revenue paid.
Amgen
On
August 1, 2016, the Company entered into a global agreement (the “Amgen Agreement”) with Amgen for the development
and commercialization of the Company’s ADXS-NEO, a novel, preclinical investigational immunotherapy, using the Company’s
proprietary Listeria monocytogenes attenuated bacterial vector which activates a patient’s immune system to respond against
unique mutations, or neoepitopes, contained in and identified from an individual patient’s tumor. Under the terms of the
Amgen Agreement, Amgen receives an exclusive worldwide license to develop and commercialize ADXS-NEO. Amgen made an upfront payment
to Advaxis of $40 million and purchased $25 million of Advaxis common stock. Amgen will fund the clinical development and commercialization
of ADXS-NEO and Advaxis will retain manufacturing responsibilities. Advaxis and Amgen will collaborate through a joint steering
committee for the development and commercialization of ADXS-NEO. Advaxis will also receive development, regulatory and sales milestone
payments of up to $475 million and high single digit to double digit royalty payments based on worldwide sales.
The
Company identified the following performance obligations under the agreement: 1) the license, 2) the obligation to provide research
activities, 3) the obligation to provide clinical supplies, 4) the obligation to perform regulatory functions and 5) the obligation
to participate on a Joint Research Committee.
The
Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize the total consideration
of the agreement. The Company determined that none of the deliverables have standalone value; all of these obligations will be
delivered throughout the estimated period of performance and therefore are accounted for as a single unit of accounting. Accordingly,
the Company recorded the $40 million upfront payment as deferred revenue on the balance sheet and will recognize revenue on a
straight-line basis over the estimated period of performance under the Amgen Agreement. Changes in the estimated period of performance
will be accounted for prospectively as a change in estimate. During the years ended October 31, 2017 and 2016, the Company recognized
revenue from the Amgen Agreement of approximately $11,781,000 and $3,745,000 related to amortization of the upfront fees.
In
connection with the Amgen Agreement, Amgen purchased directly from Advaxis 3,047,446 shares of the Company’s Common Stock,
at approximately $8.20 per share (representing a purchase at market using a 20 day VWAP methodology). The gross proceeds to Advaxis
from the sale of the shares was approximately $25 million.
The
Company considered the provisions of the research and development and collaboration guidance in determining how to recognize the
clinical development payments to be received from Amgen. The Company determined the clinical development payments should be accounted
for within the scope of collaboration arrangement accounting guidance. As a result, the Company will account for the clinical
development payments as a reduction of research and development expenses in the Statement of Operations. During the year ended
October 31, 2017, the Company received clinical development payments from Amgen totaling $6,000,000. In addition, the Company
recorded an expected clinical development payment of $1,500,000 as prepaid expenses and other current assets on the balance
sheet. In November 2017, the Company received the $1,500,000 expected clinical development payment from Amgen.
Especificos
Stendhal SA de CV
On
February 3, 2016, the Company entered into a Co-Development and Commercialization Agreement (the “Stendhal Agreement”)
with Especificos Stendhal SA de CV (“Stendhal”), for Advaxis’ lead
Lm
Technology™ immunotherapy,
axalimogene filolisbac, in HPV-associated cancers. Under the terms of the Stendhal Agreement, Stendhal will pay $10 million (“Support
Payments”) towards the expense of AIM2CERV. The Support Payments will be made over the duration of the trial. Stendhal will
also work with the Company to complete the clinical trial of axalimogene filolisbac in Mexico, Brazil, Colombia and other investigational
sites in Latin American countries. Stendhal will manage and is responsible for the costs associated with the regulatory approval
process, promotion, commercialization and market access for axalimogene filolisbac in these markets. Upon approval and commercialization
of axalimogene filolisbac, Advaxis and Stendhal will share profits on a pre-determined basis.
The
Company considered the provisions of the research and development and collaboration guidance in determining how to recognize the
Support Payments to be received from Stendhal. The Company determined the Stendhal Agreement should be accounted for within the
scope of collaboration arrangement accounting guidance. As a result, the Company will account for the support payments as a reduction of research and development
expenses in the Statement of Operations. During the year ended October 31, 2017, the Company reached the annual project milestones
and received a $3,000,000 Support Payment from Stendhal.
Knight
Therapeutics
On
August 26, 2015, the Company entered into a licensing agreement with Knight Therapeutics Inc. (“Knight”), a Canadian-based
specialty pharmaceutical company focused on acquiring, in-licensing, selling and marketing innovative prescription and over-the-counter
pharmaceutical products, to commercialize in Canada the Company’s product candidates. Under the terms of the licensing agreement,
Knight will be responsible to conduct and fund all regulatory and commercial activities in Canada. The Company is eligible to
receive royalty and sales. In connection with the licensing agreement, the Company sold directly to Knight 359,454 shares of the
common stock at $13.91 per share
Under
the terms of the agreement, Knight will be responsible to conduct and fund all regulatory and commercial activities in Canada.
We are eligible to receive double digit royalty as well as approximately $33 million in cumulative sales milestones.
Merck
& Co., Inc.
On
August 22, 2014, the Company entered into a Clinical Trial Collaboration and Supply Agreement (the “Merck Agreement”)
with Merck, pursuant to which the parties are collaborating on a Phase 1/2 dose-determination and safety trial. The Phase 1 portion
of the trial evaluated the safety of our
Lm
-LLO based immunotherapy for prostate cancer, ADXS-PSA (the “Advaxis
Compound”) as monotherapy and in combination with KEYTRUDA® (pembrolizumab), Merck’s humanized monoclonal antibody
against PD-1, (the “Merck Compound”) and has determined a recommended Phase 2 combination dose. The Phase 2
portion is evaluating the safety and efficacy of the Advaxis Compound in combination with the Merck Compound. Both phases of the
trial are in patients with previously treated metastatic castration-resistant prostate cancer. A joint development committee,
comprised of equal representatives from both parties, is responsible for coordinating all regulatory and other activities under,
and pursuant to, the Merck Agreement.
Each
party is responsible for their own internal costs and expenses to support the trial, while the Company will be responsible
for all third party costs of conducting the trial. Merck is responsible for manufacturing and supplying the Merck
Compound. The Company is responsible for manufacturing and supplying the Advaxis Compound. The Company is the sponsor
of the trial and hold the IND related to the trial.
All
data and results generated under the trial (“Collaboration Data”) will be jointly owned by the parties, except
that ownership of data and information generated from sample analysis to be performed by each party on its respective compound
will be owned by the party conducting such testing. All rights to all inventions and discoveries, which claim or cover the combined
use of the Advaxis Compound and the Merck Compound shall belong jointly to the parties. Inventions and discoveries relating solely
to the Advaxis Compound, or a live attenuated bacterial vaccine, shall be the exclusive property of us. Inventions and discoveries
relating solely to the Merck Compound, or a PD-1 antagonist, shall be the exclusive property of Merck.
The
Merck Agreement shall continue in full force and effect until completion of all of the obligations of the parties or a permitted
termination.
During
the years ended October 31, 2017, 2016 and 2015, the Company incurred approximately $2,925,000, $1,587,000 and $1,723,000, respectively,
in expenses pertaining to the Merck agreement, and such expenses were a component of research and development expenses in the
statement of operations.
MedImmune/AstraZeneca
On
July 21, 2014, the Company entered into a Clinical Trial Collaboration Agreement (the “MedImmune Agreement”) with
MedImmune, the global biologics research and development arm of AstraZeneca, pursuant to which the parties initiated a
Phase 1/2 clinical trial in the United States to evaluate the safety and efficacy of MedImmune’s investigational
anti-PD-L1 immune checkpoint inhibitor, MEDI4736, in combination with our investigational
Lm
-LLO cancer immunotherapy,
axalimogene filolisbac , as a combination treatment for patients with advanced, recurrent or refractory cervical cancer and HPV-associated
head and neck cancer. A joint steering committee, composed of equal representatives from both parties, is responsible for various
matters associated with the collaboration, including protocol approval, as well as reviewing and monitoring the progress of the
trial.
MedImmune
is responsible for providing MEDI4736 at no cost, as well as costs related to the proprietary assays performed by MedImmune
or a third party on behalf of MedImmune. The Company is the sponsor of the trial and is responsible for the submission
of all regulatory filings to support the trial, the negotiation and execution of the clinical trial agreements associated
with each trial site, and the packaging and labelling of the Advaxis and MedImmune product candidates used in the trial and
the costs associated therewith. For a period beginning upon the completion of the trial and the receipt by MedImmune of
the last final report for the trial and ending one hundred twenty (120) days thereafter (unless extended), MedImmune will
be granted first right to negotiate in good faith in an attempt to enter into an agreement with us with respect to the development,
regulatory approval and commercialization of axalimogene filolisbac and MEDI4736 to be used in combination with each other for
the treatment or prevention of cancer. Neither party is obligated to enter into such an agreement. In the event the parties do
not enter an agreement and we obtain regulatory approval for axalimogene filolisbac in combination with any PD-1 antibody or PD-L1
antibody, we shall pay MedImmune a royalty obligation and one-time payment.
All
intellectual property rights made, conceived or generated through the clinical trials that relate solely to a MedImmune development
product shall be owned solely by MedImmune. All intellectual property rights made, conceived or generated through the clinical
trials that relate solely to an Advaxis development product shall be owned solely by us. All intellectual property rights made,
conceived or generated through the clinical trials that relate to the combination of one or more MedImmune development product
and one or more Advaxis development product shall be jointly owned by both parties; provided, however that in the event the parties
do not enter into a clinical development and commercialization agreement, we will not exploit, commercialize or license the joint
inventions, except for the performance of its obligations under the MedImmune Agreement. MedImmune has the sole right to prosecute
and enforce all patents and other intellectual property rights covering all joint inventions and all associated costs will be
shared by the parties.
The
MedImmune Agreement shall remain in effect until the earlier of (i) permitted termination, (ii) the parties entering into a clinical
development and commercialization agreement or expiration of the negotiation period (unless extended), except with respect to
rights that survive termination. Either party may terminate the MedImmune Agreement upon thirty (30) days written notice upon
material breach of the other party, unless the breach is cured in such period or reasonable actions to cure the breach are initiated
and pursued (if the breach is not capable of being cured during the 30-day notice period). In addition, either party may terminate
the MedImmune Agreement immediately if the party determines in good faith that the trials may unreasonably affect the safety of
trial subjects.
During
the years ended October 31 2017, 2016 and 2015, the Company incurred approximately $2,787,000, $1,978,000 and $1,888,000, respectively,
in expenses pertaining to the MedImmune agreement, and such expenses were a component of research and development expenses in
the Statement of Operations.
Aratana
Therapeutics
On
March 19, 2014, the Company and Aratana entered into a definitive Exclusive License Agreement (the “Aratana Agreement”).
Pursuant to the Agreement, Advaxis granted Aratana an exclusive, worldwide, royalty-bearing, license, with the right to sublicense,
certain Advaxis proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted
for treatment of osteosarcoma and other cancer indications in animals. Under the terms of the Aratana Agreement, Aratana paid
an upfront payment to the Company, of $1 million. As this license has stand-alone value to Aratana (who has the ability to sublicense)
and was delivered to Aratana, upon execution of the Aratana Agreement, the Company recorded the $1 million payment as licensing
revenue during the 12 months ended October 31, 2014. Aratana will also pay the Company up to an additional $36.5 million based
on the achievement of certain milestones with respect to the advancement of products pursuant to the terms of the Aratana Agreement.
In addition, Aratana may pay the Company an additional $15 million in cumulative sales milestones pursuant to the terms of the
Aratana Agreement.
Advaxis
(i) issued and sold 306,122 shares of Advaxis’ Common Stock to Aratana at a price of $4.90 per share, which was equal to
the closing price of the Common Stock on the NASDAQ Capital Market on March 19, 2014, and (ii) issued a ten-year warrant to Aratana
giving Aratana the right to purchase up to 153,061 additional shares of Advaxis’ Common Stock at an exercise price of $4.90
per share. In connection with the sale of the Common Stock and warrants, Advaxis received aggregate net proceeds of $1,500,000.
Biocon
Limited
On
January 20, 2014, we entered into a Distribution and Supply Agreement (“Biocon Agreement”) with Biocon Limited, a
company incorporated under the laws of India.
Pursuant
to the Biocon Agreement, we granted Biocon an exclusive license (with a right to sublicense) to (i) use our data from clinical
development activities, regulatory filings, technical, manufacturing and other information and know-how to enable Biocon to submit
regulatory filings for axalimogene filolisbac in the following territories: India, Malaysia, Bangladesh, Bhutan, Maldives, Myanmar,
Nepal, Pakistan, Sri Lanka, Bahrain, Jordan, Kuwait, Oman, Saudi Arabia, Qatar, United Arab Emirates, Algeria, Armenia, Egypt,
Eritrea, Iran, Iraq, Lebanon, Libya, Sudan, Syria, Tunisia and Yemen (collectively, the “Territory”) and (ii) import,
promote, market, distribute and sell pharmaceutical products containing axalimogene filolisbac .
Global
BioPharma Inc.
On
December 9, 2013, the Company entered into an exclusive licensing agreement for the development and commercialization of axalimogene
filolisbac with Global BioPharma, Inc. (“GBP”), a Taiwanese based biotech company funded by a group of investors led
by Taiwan Biotech Co., Ltd (TBC).
GBP
is planning to conduct a randomized Phase 2, open-label, controlled trial in HPV-associated NSCLC in patients following first-line
induction chemotherapy. GBP has obtained Taiwanese regulatory approval for this trial and plans to initiate this trial in 2018.
This trial will be fully funded exclusively by GBP. GBP will continue to explore the use of our lead product candidate in several
other indications including head and neck, and anal cancer. GBP also plans to conduct registration trials with axalimogene filolisbac
for the treatment of advanced cervical cancer.
GBP
will pay Advaxis event-based financial milestones, an annual license fee, and annual net sales royalty payments in the high single
to double digits. In addition, as an upfront payment, GBP made an investment in Advaxis of $400,000 by purchasing from the Company
108,724 shares of its Common Stock at a price of $3.68 per share, GBP also received 100,000 warrants at an exercise price of $5.52
which expire in December 2018.
GBP
will be responsible for all clinical development and commercialization costs in the GBP territory. GBP will also reimburse Advaxis
$2.25 million toward AIM2CERV. GBP is committed to establishing manufacturing capabilities for its own. Under the terms of the
agreement, we will exclusively license the rights of axalimogene filolisbac to GBP for the Asia, Africa, and former USSR territory,
exclusive of India and certain other countries, for all HPV-associated indications. Advaxis will retain exclusive rights to axalimogene
filolisbac for the rest of the world.
During
each of the years ended October 31, 2017 and 2016, the Company recognized revenue of $250,000 for annual license fees.
10.
COMMITMENTS AND CONTINGENCIES
Legal
Proceedings
Knoll
On
August 21, 2015, Knoll Capital Management L.P. (“KCM”) filed a complaint against the Company in the Delaware Court
of Chancery. The complaint alleged the existence of an oral agreement for the purchase by Knoll from the Company of 1,666,666.67
shares of Company stock at a price of $3.00 per share. KCM alleged that the Company breached this alleged agreement and sought
specific performance or, alternatively, money damages for breach of contract. KCM served the Company with the complaint on August
31, 2015, and then served an amended complaint on October 16, 2015. The Company moved to dismiss the amended complaint on October
26, 2015 and that motion was denied on January 29, 2016. The Company filed an answer to the amended complaint on February 12,
2016.
In
lieu of continuing to unnecessarily incur litigation expenses, on April 27, 2017, the Company settled the matter for a non-material
amount, predominately reimbursed by the Company’s insurance, and the parties entered into a definitive confidential settlement
agreement. The Company expressly denies any admission or wrongdoing and the settlement was entered into solely for the purpose
of avoiding the burden, inconvenience, and expense of further litigation. On May 11, 2017, following resolution of the matter
by the parties, the Court granted a Stipulation Of Dismissal With Prejudice.
Bono
On
August 20, 2015, a derivative complaint was filed by a purported Company shareholder in the United States District Court for the
District of New Jersey styled David Bono v. O’Connor, et al., Case No. 3:15-CV-006326-FLW-DEA (D.N.J. Aug. 20, 2015) (the
“Bono Action”). The complaint is based on general allegations related to certain stock options granted to the individual
defendants and generally alleges counts for breaches of fiduciary duty and unjust enrichment. The complaint also alleges additional
claims for violation of Section 14(a) of the Securities Exchange Act of 1934 and for waste of corporate assets. The complaint
seeks damages and costs of an unspecified amount, disgorgement of compensation obtained by the individual defendants, and injunctive
relief.
Defendants
filed a motion to dismiss the Bono Action. On May 23, 2016, the Court issued an opinion and order granting in part and denying
in part defendants’ motion to dismiss. On October 5, 2016, the Court denied plaintiff’s motion for reconsideration
of its May 23 order. On April 13, 2017, the parties advised the Court that they had reached a tentative agreement in principle
to settle the action, subject to negotiating an award of attorneys’ fees and expenses to plaintiff’s counsel and a
stipulation of settlement, and, ultimately, Court approval. The parties subsequently executed the stipulation of settlement on
October 2, 2017. The Court entered an order preliminarily approving the settlement on November 7, 2017. The final fairness hearing
with the Court is presently scheduled for January 29, 2018.
Corporate
Office & Manufacturing Facility Lease
The
Company leases its corporate office and manufacturing facility under an operating lease expiring in November, 2025.
Future
minimum payments under the Company’s operating leases are as follows:
Year
ended October 31,
|
|
|
|
|
|
|
|
2018
|
|
$
|
1,041,895
|
|
2019
|
|
|
1,107,385
|
|
2020
|
|
|
1,232,907
|
|
2021
|
|
|
1,317,640
|
|
2022
|
|
|
1,368,819
|
|
Thereafter
|
|
|
4,378,521
|
|
Total
|
|
$
|
10,447,167
|
|
Rent
expense for the years ended October 31, 2017, 2016 and 2015 was $1,188,005, $935,281 and $150,000, respectively.
11.
INCOME TAXES:
The
income tax provision (benefit) consists of the following:
|
|
October
31, 2017
|
|
|
October
31, 2016
|
|
|
October
31, 2015
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
(34,296,121
|
)
|
|
|
(18,152,484
|
)
|
|
|
(14,513,684
|
)
|
State
and Local
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(4,452,682
|
)
|
|
|
(2,535,625
|
)
|
|
|
(1,609,349
|
)
|
Deferred
|
|
|
(1,123,593
|
)
|
|
|
(3,698,506
|
)
|
|
|
(1,840,276
|
)
|
Change
in valuation allowance
|
|
|
35,419,714
|
|
|
|
21,850,990
|
|
|
|
16,353,960
|
|
Income
tax provision (benefit)
|
|
$
|
(4,452,682
|
)
|
|
$
|
(2,535,625
|
)
|
|
$
|
(1,609,349
|
)
|
The
Company has U.S. federal net operating loss carryovers (“NOLs”) of approximately $187,254,000, $137,082,000
and $100,662,000 at October 31, 2017, 2016 and 2015, respectively, available to offset taxable income which expire beginning in
2023. If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than
50% ownership change as determined under the regulations. In fiscal years 2017 and 2016, the Company performed a detailed analysis
of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers.
From the entire federal NOL of $187,254,000 as of October 31, 2017, approximately $155,930,000 is available for immediate use
based on Internal Revenue Code Section 382 analysis. The NOL and the deferred tax asset table below does not include approximately
$24,824,000 of NOL’s that may expire unused. The Company also has New Jersey State Net Operating Loss carryovers of approximately
$50,745,000, $66,029,000 and $26,245,000 as of October 31, 2017, 2016 and 2015, respectively, available to offset future taxable
income through 2037.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future
generation for taxable income during the periods in which temporary differences representing net future deductible amounts become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. After consideration of all the information available, management believes that significant
uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation
allowance.
The
Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain
positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position
must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or
expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to
as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of
tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation
to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
If
applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other
Income (Expense)” in the statement of operations. Penalties would be recognized as a component of “General and Administrative
Expenses” in the statement of operations.
No
interest or penalties on unpaid tax were recorded during the years ended October 31, 2017, 2016 and 2015, respectively. As of
October 31, 2017 and 2016, no liability for unrecognized tax benefits was required to be reported. The Company does not expect
any significant changes in its unrecognized tax benefits in the next year.
The
Company files tax returns in the U.S. federal and state jurisdictions and is subject to examination by tax authorities beginning
with the year ended October 31, 2013.
The
Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:
|
|
Years
Ended
|
|
|
|
October
31, 2017
|
|
|
October
31, 2016
|
|
Deferred
Tax Assets
|
|
|
|
|
|
|
|
|
Net
operating loss carryovers
|
|
$
|
66,681,000
|
|
|
$
|
51,701,000
|
|
Stock-based
compensation
|
|
|
21,921,000
|
|
|
|
15,239,000
|
|
Research
and development credits
|
|
|
7,293,000
|
|
|
|
5,672,000
|
|
Deferred
revenue
|
|
|
9,775,000
|
|
|
|
-
|
|
Other
deferred tax assets
|
|
|
1,515,000
|
|
|
|
-
|
|
Total
deferred tax assets
|
|
$
|
107,185,000
|
|
|
$
|
72,612,000
|
|
Valuation
allowance
|
|
|
(104,738,000
|
)
|
|
|
(69,317,000
|
)
|
Deferred
tax asset, net of valuation allowance
|
|
$
|
2,447,000
|
|
|
$
|
3,295,000
|
|
|
|
|
|
|
|
|
|
|
Deferred
Tax Liabilities
|
|
|
|
|
|
|
|
|
Other
deferred tax liabilities
|
|
|
(2,447,000
|
)
|
|
|
(3,295,000
|
)
|
Total
deferred tax liabilities
|
|
$
|
(2,447,000
|
)
|
|
$
|
(3,295,000
|
)
|
Net
deferred tax asset (liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
The
expected tax (expense) benefit based on the statutory rate is reconciled with actual tax expense benefit as follows:
|
|
Years
Ended
|
|
|
|
October
31, 2017
|
|
|
October
31, 2016
|
|
|
October
31, 2015
|
|
US
Federal statutory rate
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
State
income tax, net of federal benefit
|
|
|
1.15
|
|
|
|
4.86
|
|
|
|
3.78
|
|
Permanent
differences
|
|
|
(2.30
|
)
|
|
|
(2.00
|
)
|
|
|
(1.91
|
)
|
Research
and development credits
|
|
|
2.36
|
|
|
|
2.16
|
|
|
|
2.06
|
|
Income
tax benefit from sale of New Jersey NOL carryovers
|
|
|
4.55
|
|
|
|
3.33
|
|
|
|
3.31
|
|
Change
in valuation allowance
|
|
|
(36.20
|
)
|
|
|
(28.72
|
)
|
|
|
(33.62
|
)
|
Other
|
|
|
0.99
|
|
|
|
(10.30
|
)
|
|
|
(4.31
|
)
|
Income
tax (provision) benefit
|
|
|
4.55
|
%
|
|
|
3.33
|
%
|
|
|
3.31
|
%
|
Sale
of Net Operating Losses (NOLs)
The
Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses under the State of New Jersey
NOL Transfer Program. In fiscal 1Q 2018, the Company plans to receive a net cash amount of $4,452,682 from the sale of its state
NOLs and research and development tax credits for the period ended October 31, 2016. In November 2016, the Company received a
net cash amount of $2,549,862 from the sale of its state NOLs and research and development tax credits for the period ended October
31, 2015. In December 2015, the Company received a net cash amount of $1,609,349 from the sale of its state NOLs and research
and development tax credits for the period ended October 31, 2014. Following the receipt of the NOL and research and development
tax credit for the period ending October 31, 2016, the Company will have reached the limit under the NJ NOL program and will no
longer be able to participate in future sales.
12.
SHAREHOLDERS’ EQUITY:
Registered
Direct Offerings
On
August 19, 2016, the Company sold 2,244,443 shares of common stock in a registered direct offering at a per share price of $13.50
for gross proceeds of approximately $30.3 million. The net proceeds to the Company, after deducting the Placement Agents’
fees and other estimated offering expenses payable by the Company, were approximately $28.2 million.
On
February 18, 2015, the Company priced a registered direct offering of 3,068,095 shares of its Common Stock at $7.50 per share.
The transaction closed on February 19, 2015, and the Company received gross proceeds of approximately $23.0 million from the offering.
After deducting offering expenses, the net proceeds from the offering were approximately $22.3 million.
On
December 19, 2014, the Company priced a registered direct offering of 3,940,801 shares of its Common Stock at $4.25 per share.
The transaction closed on December 22, 2014, and the Company received gross proceeds of approximately $16.7 million from the offering.
After deducting offering expenses, the net proceeds from the offering were approximately $15.8 million.
Public
Offerings
On
May 5, 2015, the Company closed on an underwritten public offering of 2,800,000 shares of Common Stock at a public offering price
of $19.00 per share. On May 20, 2015, the Company closed the underwriters’ overallotment option to purchase 420,000 shares
of its Common Stock at a public offering price of $19.00 per share. The Company received gross proceeds of approximately $61.2
million from the May 2015 public offerings. After deducting offering expenses, the net proceeds from the May 2015 public offerings
were approximately $56.7 million.
13
.
EMPLOYEE BENEFIT PLAN
The
Company sponsors a 401(k) Plan. Employees become eligible for participation upon the start of employment. Participants may elect
to have a portion of their salary deferred and contributed to the 401(k) plan up to the limit allowed under the Internal Revenue
Code. The Company makes a matching contribution to the plan for each participant who has elected to make tax-deferred contributions
for the plan year. The Company made matching contributions which amounted to $449,086, $172,276 and $51,403 for the years ended
October 31, 2017, 2016 and 2015, respectively. These amounts were charged to the Statement of Operations. The Employer contributions
vest immediately.
14
.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The
following interim financial information presents the Company’s 2017, 2016 and 2015 results of operations on a quarterly
basis (in thousands, except per share amounts):
|
|
Quarter
Ended
|
|
|
|
January
31, 2017
|
|
|
April
30, 2017
|
|
|
July
31, 2017
|
|
|
October
31, 2017
|
|
Revenue
|
|
$
|
3,790,842
|
|
|
$
|
3,425,380
|
|
|
$
|
3,051,620
|
|
|
$
|
1,763,208
|
|
Net
loss
|
|
|
(17,081,003
|
)
|
|
|
(20,467,655
|
)
|
|
|
(32,625,595
|
)
|
|
|
(23,261,249
|
)
|
Net
loss income per common share, basic and diluted
|
|
|
(0.43
|
)
|
|
|
(0.51
|
)
|
|
|
(0.80
|
)
|
|
|
(0.57
|
)
|
|
|
Quarter
Ended
|
|
|
|
January
31, 2016
|
|
|
April
30, 2016
|
|
|
July
31, 2016
|
|
|
October
31, 2016
|
|
Revenue
|
|
$
|
250,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,744,856
|
|
Net
loss
|
|
|
(19,844,935
|
)
|
|
|
(15,522,450
|
)
|
|
|
(16,486,008
|
)
|
|
|
(21,702,837
|
)
|
Net
loss income per common share, basic and diluted
|
|
|
(0.59
|
)
|
|
|
(0.45
|
)
|
|
|
(0.48
|
)
|
|
|
(0.55
|
)
|
|
|
Quarter
Ended
|
|
|
|
January
31, 2015
|
|
|
April
30, 2015
|
|
|
July
31, 2015
|
|
|
October
31, 2015
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Net
loss
|
|
|
(7,033,870
|
)
|
|
|
(13,855,259
|
)
|
|
|
(13,562,026
|
)
|
|
|
(12,579,963
|
)
|
Net
loss income per common share, basic and diluted
|
|
|
(0.33
|
)
|
|
|
(0.52
|
)
|
|
|
(0.44
|
)
|
|
|
(0.38
|
)
|
15
.
SUBSEQUENT EVENTS
On
November 2, 2017, the Company granted to executives 300,000 options with an exercise price of $3.19 and 84,000 performance-based
RSU’s (“PRSU’s). The options and PRSU’s vest annually in three equal installments beginning on the first
anniversaries of the grant date.
On
November 2, 2017, the Company granted to Directors 180,000 options with an exercise price of $3.19. The options shall vest in
one installment on the first anniversary of the grant date.