Item 1. Financial Statements
The following unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the opinion of management, all adjustments (which include
only normal recurring adjustments) considered necessary for a fair statement of the interim periods presented have been included.
The year-end balance sheet data was derived from audited financial statements, but does not include all the disclosures required
by accounting principles generally accepted in the United States of America. Operating results for the three and nine month periods
ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2016.
REPROS THERAPEUTICS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands except share
and per share amounts)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,813
|
|
|
$
|
8,688
|
|
Restricted cash
|
|
|
916
|
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
135
|
|
|
|
66
|
|
Total current assets
|
|
|
2,864
|
|
|
|
8,754
|
|
Fixed assets, net
|
|
|
-
|
|
|
|
3
|
|
Non-current restricted cash
|
|
|
919
|
|
|
|
-
|
|
Total assets
|
|
$
|
3,783
|
|
|
$
|
8,757
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,246
|
|
|
$
|
1,880
|
|
Accrued expenses
|
|
|
1,192
|
|
|
|
779
|
|
Total current liabilities
|
|
|
2,438
|
|
|
|
2,659
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Accrued severance
|
|
|
916
|
|
|
|
-
|
|
Warrant liability
|
|
|
1,716
|
|
|
|
-
|
|
Total liabilities
|
|
|
5,070
|
|
|
|
2,659
|
|
|
|
|
|
|
|
|
|
|
Commitment & Contingencies (note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Undesignated Preferred Stock, $.001 par value, 5,000,000 shares authorized, none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common Stock, $.001 par value, 75,000,000 shares authorized, 39,602,157 and 25,938,602 shares issued, respectively; 39,489,807 and 25,826,252 shares outstanding, respectively, as of September 30, 2017 and December 31, 2016
|
|
|
40
|
|
|
|
26
|
|
Additional paid-in capital
|
|
|
329,305
|
|
|
|
326,981
|
|
Cost of treasury stock, 112,350 shares
|
|
|
(1,380
|
)
|
|
|
(1,380
|
)
|
Accumulated deficit
|
|
|
(329,252
|
)
|
|
|
(319,529
|
)
|
Total stockholders’ equity
|
|
|
(1,287
|
)
|
|
|
6,098
|
|
Total liabilities and stockholders’ equity
|
|
$
|
3,783
|
|
|
$
|
8,757
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
REPROS THERAPEUTICS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands except per share
amounts)
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
9
|
|
|
$
|
10
|
|
|
$
|
23
|
|
|
$
|
41
|
|
Change in fair value of warrant liability
|
|
|
295
|
|
|
|
-
|
|
|
|
135
|
|
|
|
-
|
|
Total revenues and other income
|
|
|
304
|
|
|
|
10
|
|
|
|
158
|
|
|
$
|
41
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
979
|
|
|
|
3,182
|
|
|
|
4,192
|
|
|
|
10,191
|
|
General and administrative
|
|
|
940
|
|
|
|
997
|
|
|
|
5,689
|
|
|
|
3,144
|
|
Total expenses
|
|
|
1,919
|
|
|
|
4,179
|
|
|
|
9,881
|
|
|
|
13,335
|
|
Net loss
|
|
$
|
(1,615
|
)
|
|
$
|
(4,169
|
)
|
|
$
|
(9,723
|
)
|
|
$
|
(13,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share – basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0. 17
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in loss per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
37,598
|
|
|
|
24,495
|
|
|
|
30,797
|
|
|
|
24,372
|
|
Diluted
|
|
|
37,598
|
|
|
|
24,495
|
|
|
|
30,797
|
|
|
|
24,372
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
REPROS THERAPEUTICS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(unaudited and in thousands except share
and per share amounts)
|
|
Common Stock
|
|
|
Additional
|
|
|
Treasury Stock
|
|
|
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
Balance at December 31, 2016
|
|
|
25,938,602
|
|
|
$
|
26
|
|
|
$
|
326,981
|
|
|
|
112,350
|
|
|
$
|
(1,380
|
)
|
|
$
|
(319,529
|
)
|
|
$
|
6,098
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
680
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
680
|
|
Issuance of 849,157 shares of common stock pursuant to the Equity Distribution Agreement at a weighted average price of $1.20, net of offering costs of $32
|
|
|
849,157
|
|
|
|
1
|
|
|
|
1,020
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,021
|
|
Issuance of 2,744,125 shares of common stock at $0.60 per share, Series A and Series B warrants, and pre-funded Series C warrants at $0.60 per share in the May Public Offering, net of offering costs of $508
|
|
|
2,744,125
|
|
|
|
3
|
|
|
|
(1,213
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,210
|
)
|
Exercise of 2,245,875 Series C Warrants to purchase common stock for cash at $0.001 per share
|
|
|
2,245,875
|
|
|
|
2
|
|
|
|
1,277
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,279
|
|
Net Number Cashless Exercise of 2,397,834 Series B Warrants to purchase common stock (share settlement of Warrant liability)
|
|
|
7,719,958
|
|
|
|
8
|
|
|
|
560
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
568
|
|
Issuance of 60,000 shares of restricted common stock
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance of 44,440 shares of common stock for vested RSUs
|
|
|
44,440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,723
|
)
|
|
|
(9,723
|
)
|
Balance at September 30, 2017
|
|
|
39,602,157
|
|
|
$
|
40
|
|
|
$
|
329,305
|
|
|
|
112,350
|
|
|
$
|
(1,380
|
)
|
|
$
|
(329,252
|
)
|
|
$
|
(1,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
24,430,461
|
|
|
$
|
24
|
|
|
$
|
322,179
|
|
|
|
112,350
|
|
|
$
|
(1,380
|
)
|
|
$
|
(302,256
|
)
|
|
$
|
18,567
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,491
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,491
|
|
Exercise of 1,333 Series A warrants to purchase common stock for cash at $0.01 per share
|
|
|
1,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance of 807,340 shares of common stock at a weighted average price of $2.15, net of offering costs of $1450
|
|
|
807,340
|
|
|
|
1
|
|
|
|
1,593
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,594
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,294
|
)
|
|
|
(13,294
|
)
|
Balance at September 30, 2016
|
|
|
25,239,134
|
|
|
$
|
25
|
|
|
$
|
325,263
|
|
|
|
112,350
|
|
|
$
|
(1,380
|
)
|
|
$
|
(315,550
|
)
|
|
$
|
8,358
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
REPROS THERAPEUTICS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited and in thousands)
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,723
|
)
|
|
$
|
(13,294
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3
|
|
|
|
4
|
|
Noncash stock-based compensation
|
|
|
680
|
|
|
|
1,491
|
|
Change in fair value of warrant liability
|
|
|
(135
|
)
|
|
|
-
|
|
Increase in prepaid expenses and other current assets
|
|
|
(70
|
)
|
|
|
(74
|
)
|
Increase (decrease) in accounts payable and accrued expenses
|
|
|
696
|
|
|
|
(609
|
)
|
Net cash used in operating activities
|
|
|
(8,549
|
)
|
|
$
|
(12,482
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
-
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Issuance of common stock and warrants, net of offering costs
|
|
|
3,507
|
|
|
|
1,594
|
|
Proceeds from exercise of stock warrants
|
|
|
2
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
3,509
|
|
|
|
1,594
|
|
Net decrease in cash, cash equivalents and restricted cash
|
|
|
(5,040
|
)
|
|
|
(10,888
|
)
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
8,688
|
|
|
|
21,393
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
3,648
|
|
|
$
|
10,505
|
|
|
|
|
|
|
|
|
|
|
Noncash transactions:
|
|
|
|
|
|
|
|
|
Settlement of warrant liability due to cashless warrant exercises
|
|
$
|
(568
|
)
|
|
|
-
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
REPROS THERAPEUTICS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 2017
(Unaudited)
NOTE 1 — Organization, Operations,
Liquidity and Recent Developments
Repros Therapeutics
Inc. (the “Company,” “RPRX,” “Repros,” or “we,” “us” or “our”)
was organized on August 20, 1987. We are a biopharmaceutical company focused on the development of new drugs to treat hormonal
and reproductive system disorders.
We are developing Proellex®,
an orally administered selective blocker of the progesterone receptor in women, for the treatment of uterine fibroids and endometriosis.
Uterine fibroids and endometriosis affect millions of women of reproductive age. Proellex® has shown statistically significant
results in previous Phase 2 studies for uterine fibroids and endometriosis. We completed a low dose escalating study as permitted
by the Food and Drug Administration (“FDA”) in late 2011, to determine both signals of efficacy and safety for low
oral doses of the drug. There was no evidence of elevations of liver enzymes over baseline, suggesting these lower doses avoid
the type of adverse events seen at much higher doses in earlier studies. On March 17, 2014, we announced that the FDA indicated
that we may proceed to conduct Phase 1 and Phase 2 studies of low dose oral Proellex® for uterine fibroids and endometriosis
while remaining on partial clinical hold. This guidance indicated that the highest allowed dose will be 12 mg daily. On December
29, 2014, we announced that we have initiated a Phase 2B study for low dose oral Proellex® in the treatment of uterine fibroids.
This study was fully enrolled in January 2016 and on November 14, 2016, we announced positive clinical data from this study after
two 18-week courses of treatment as compared to placebo. On April 10, 2017, the Company announced that it had a meeting with the
FDA to discuss the progress and next steps in the development of Proellex® for the treatment of uterine fibroids. Shortly before
the meeting, the Company was notified that the meeting would be a type C/Guidance meeting, rather than a type B/End of phase 2
meeting as previously anticipated. At the meeting, the FDA confirmed that Proellex® will continue on the current partial clinical
hold while they consult with liver experts within the FDA regarding previously disclosed effects on the liver. On July 17, 2017,
the Company announced that it received preliminary feedback from the FDA on the oral Proellex® clinical development program.
The Proellex
®
program will remain on partial clinical hold, and based upon the FDA’s review of all the existing
liver function safety data, the FDA has indicated that the Company will be required to compile a large pre-approval safety data
base to support future development.
The Company has an
active Investigational New Drug Application (“IND”) for the vaginal delivery of Proellex® for the treatment of
uterine fibroids. Since the clinical hold relates only to oral delivery of Proellex®, this IND has no clinical hold issues.
In the first quarter of 2012, we initiated a Phase 2 vaginal administration study for the treatment of uterine fibroids and subsequently
reported the final study results in January 2013. We held an end of Phase 2 meeting with the FDA in May 2013, to discuss a Phase
3 study design for vaginally delivered Proellex as a treatment for uterine fibroids. The FDA recommended that a Phase 2B study
should be conducted prior to commencing a Phase 3 program. On December 29, 2014, we announced that we have initiated a Phase 2B
study for vaginally delivered Proellex® in the treatment of uterine fibroids. This study was fully enrolled in January 2016
and on November 14, 2016, we announced positive clinical data from this study after two 18-week courses of treatment as compared
to placebo. In light of the FDA guidance on the oral Proellex® development program, the Company is assessing increasing its
focus on the vaginal delivery of Proellex®.
We are also developing
enclomiphene, a single isomer of clomiphene citrate which is an orally active proprietary small molecule compound. Enclomiphene
is for the treatment of secondary hypogonadism in overweight men wishing to restore normal testicular function. Men with secondary
hypogonadism exhibit low testosterone levels due to under stimulated testes but they are generally fertile. Enclomiphene is designed
to treat the underlying mechanism, insufficient stimulation of the testes by the pituitary, which causes secondary hypogonadism.
Secondary hypogonadism due to being overweight or obese is the single greatest cause of hypogonadism in general.
On February 2, 2015,
we announced that we electronically submitted our New Drug Applications (“NDA”) to the FDA for enclomiphene. The FDA
accepted the NDA for review on April 1, 2015 and later assigned a Prescription Drug User Fee (“PDUFA”) goal date of
November 30, 2015. In addition, the Division of Bone, Reproductive and Urologic Products (the “Division”) of the FDA
scheduled an advisory committee meeting to review the NDA for November 3, 2015. However, the Division subsequently cancelled the
scheduled advisory committee meeting due to questions that arose late in the review regarding the bioanalytical method validation
that could affect interpretability of certain pivotal study data. On December 1, 2015, we announced that we had received a Complete
Response Letter (“CRL”) from the FDA. A CRL informs companies that an NDA cannot be approved in its present form. In
the CRL, the FDA stated that, based on recent scientific developments, the design of the enclomiphene Phase 3 studies is no longer
adequate to demonstrate clinical benefit and recommended that Repros conduct an additional Phase 3 study or studies to support
approval in the target population. The FDA also noted concerns regarding study entry criteria, titration and bioanalytical method
validation in the Phase 3 program.
Subsequently, on February
4, 2016, the Company attended a meeting with the FDA reviewers and senior leaders to discuss resolution of issues identified during
the NDA review. The meeting covered a broad range of topics surrounding the NDA data as well as emerging agency and expert thinking
regarding the treatment of hypogonadism. The Company believes based on the meeting that the FDA is not closed to considering secondary
hypogonadism as an indication. Additionally, in January 2016, the Company initiated a Phase 2 double-blind, placebo controlled,
proof of concept study, ZA-205, in obese secondary hypogonadal men to assess the impact of enclomiphene on metabolic parameters
and quality of life under a diet and exercise regimen. This study was fully enrolled in February 2016 and on August 15, 2016, we
reported six month interim results from this study.
Additionally, on September
12, 2016, we reported that we successfully submitted a European centralized marketing authorization application (“MAA”)
for enclomiphene for the treatment of secondary hypogonadism. This MAA was subsequently accepted by the European Medicines Agency
(“EMA”) which, as previously reported, has assigned the United Kingdom as the primary rapporteur and France as the
co-rapporteur for the application review. As part of the ongoing review process, the Company has filed responses to the EMAs questions
in the third quarter of 2017.
On December 6, 2016,
the Company participated in the industry presentation at the Bone, Reproductive and Urologic Drugs’ Advisory Committee meeting.
The advisory panel provided the FDA with advice regarding a clinical and regulatory path to approval for products, such as enclomiphene,
in subjects with obesity-related hypogonadism who wish to maintain spermatogenesis. The panel voted 16 to 5 that the achievement
of testosterone improvement while maintaining evidence of spermatogenesis was not sufficient, in and of itself, to provide evidence
of clinical benefit. At the meeting, numerous panel members suggested that an additional endpoint related to symptoms should be
assessed.
Liquidity
On August 9,
2016, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Ladenburg
Thalmann & Co. Inc. (“Ladenburg”), pursuant to which we had the ability to issue and sell from time to time
through Ladenburg, as sales agent and/or principal, shares of our common stock having an aggregate offering price of up to
$10 million (the “ATM Shares”). Ladenburg had no obligation to sell on our behalf any specific number or
dollar amount of the ATM Shares, but Ladenburg, upon acceptance of written instructions from us, agreed to use its
commercially reasonable efforts consistent with its customary trading and sales practices, to sell the ATM Shares up to the
amount specified, and otherwise in accordance with the terms of a placement notice delivered to Ladenburg. Ladenburg
was entitled to receive a commission of 3% of the gross sales price of all ATM Shares sold through it under the Equity
Distribution Agreement. Effective May 9, 2017, the Company terminated the Sales Agreement and the related ATM Program. During
the nine month period ended September 30, 2017, we sold 849,157 ATM Shares at a weighted average share price of $1.20 for
proceeds of approximately $1,021,000, net of expenses including approximately $32,000 in commissions to Ladenburg.
On May 23, 2017, the
Company sold 2,744,125 shares of common stock and pre-funded Series C Warrants to purchase up to 2,245,875 shares of common stock
in an underwritten public offering to certain investors (the “May Public Offering”). Each share of common stock was
sold at a price of $0.60 and each Series C Warrant was issued with an exercise price of $0.60 per share of common stock, $0.60
of which was pre-funded at closing and $0.001 was payable upon exercise. This May Public Offering also included the issuance of
Series A Warrants to purchase 3,742,500 shares of our common stock at an initial exercise price of $0.84 per share and Series B
Warrants to purchase 2,495,000 shares of our common stock at an initial exercise price of $0.92 per share. Each share of common
stock and each pre-funded Series C Warrant to purchase a share of common stock were sold together with a Series A Warrant to purchase
0.75 share of common stock and a Series B Warrant to purchase 0.50 share of common stock. The net proceeds to the Company from
the sale of common stock and warrants, after deducting underwriting discounts and commissions and other offering expenses, were
approximately $2.5 million. For further discussion of the May Public Offering, see Note 6 to the financial statements included
herein.
As of September
30, 2017, we had accumulated losses of $329.3 million, approximately $1.8 million in cash and cash equivalents, and accounts
payable and accrued expenses of approximately $3.4 million, in the aggregate. Included in our accrued expenses is $1.8
million related to the accrued severance payments due Mr. Podolski upon his termination, which are anticipated to be paid in
the first quarter of 2018 and 2019 with our restricted cash of $1.8 million. We anticipate that our current liquidity will be
sufficient to continue the development of our product candidates (to the extent we deem appropriate) and meet our obligations
as they become due through the end of 2017. We continue to explore potential additional financing alternatives, including
corporate partnering opportunities, that would provide sufficient funds to enable us to continue to develop our two product
candidates through FDA approval; however, there can be no assurance that we will be successful in raising any such additional
funds on a timely basis or at all. The foregoing matters raise substantial doubt about our ability to continue as a going
concern.
Nasdaq Listing
On November 8, 2017,
we received written notification from the Listing Qualifications Staff (the “Staff”) of The NASDAQ Stock Market LLC
(“Nasdaq”) indicating that, based upon our continued non-compliance with the minimum stockholders’ equity requirement
for continued listing on The NASDAQ Capital Market, as set forth in NASDAQ Marketplace Rule 5550(b)(2) (the “Stockholders’
Equity Rule”), the Staff had determined to delist our common stock from Nasdaq (the “Staff Determination”) unless
we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). We will have until November 15, 2017 to
request a hearing.
We intend to timely
request a hearing before the Panel, which request will stay any suspension or delisting action by Nasdaq at least until the hearing
process concludes and any extension granted by the Panel expires. At the hearing, we plan to present our plan to evidence compliance
with the Stockholders’ Equity Rule, and request an extension of time within which to do so.
The November 8, 2017
notice has no immediate effect on the listing of our common stock and the common stock will continue to trade on the NASDAQ Capital
Market under the symbol “RPRX” at least until the hearing process concludes and any extension granted by the Panel
expires.
There can be no assurances that the Panel
will grant our request for continued listing or that we will be able to evidence compliance with all applicable requirements for
continued listing on The NASDAQ Capital Market within any extension of time that may be granted by the Panel.
Basis of Presentation
These financial statements
are unaudited; however, in the opinion of management, these statements reflect all adjustments necessary for a fair statement of
the results for the periods reported. All such adjustments are of a normal recurring nature unless disclosed otherwise. These financial
statements, including notes, have been prepared in accordance with the applicable rules of the SEC and do not include all of the
information and disclosures required by U.S. GAAP for complete financial statements.
These interim financial
statements should be read in conjunction with the financial statements and notes thereto included in our 2016 Annual Report on
Form 10-K. The results of operations for the three and nine month periods ended September 30, 2017 are not necessarily indicative
of the results to be expected for the full year.
Changes in Accounting Policies
In
November 2016, the FASB issued ASU No. 2016-18,
“Statement of Cash Flows (Topic
230): Restricted Cash”. The new standard requires restricted cash to be included with cash and cash equivalents when reconciling
the beginning and ending amounts on the statement of cash flows, and requires additional disclosures in the notes to the financial
statements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal
years and early adoption is permitted. The Company adopted this standard during the quarter ended March 31, 2017. See Note 2 to
the financial statements included herein.
In March 2016, the
FASB issued ASU 2016-09, Compensation—Stock Compensation (ASC Topic 718): Improvements to Employee Share-Based Payment
Accounting. The new standard simplifies the accounting for stock-based compensation, including amendments on how both taxes related
to stock-based compensation and cash payments made to taxing authorities are recorded. ASU 2016-09 is effective for annual reporting
periods beginning on or after December 15, 2016, and interim periods within those annual periods and early application is permitted,
with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company adopted ASU 2016-09 effective January
1, 2017. The adoption of this standard did not have a material effect on the Company’s financial statements.
In November 2015,
the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”),
which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet.
The ASU simplifies the current guidance in ASC Topic 740, Income Taxes, which requires entities to separately present deferred
tax assets and liabilities as current and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning
after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2015-07 effective January
1, 2017. The adoption of this standard did not have a material effect on the Company’s financial statements.
New Accounting Pronouncements Not Yet
Adopted
In July 2017,
the FASB issued ASU No. 2017-11, “(Part I) Accounting or Certain Financial Instruments with Down Round Features”
(“ASU 2017-11”), which changes the classification analysis of certain equity-linked financial instruments with down
round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature will no longer preclude equity classification when assessing whether the instrument is indexed to an entity’s
own stock. ASU 2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In February 2016, FASB
issued ASU 2016-02, Leases (ASC Topic 842), which supersedes ASC Topic 840, Leases. The new standard is intended to increase transparency
and comparability of organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. The new guidance is effective for financial statements issued for annual reporting periods beginning
after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact of this standard on
its consolidated financial statements.
In May 2014, the FASB
issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU
2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods
or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services.
In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this
guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from
contracts with customers. On July 9, 2015, the FASB voted to delay the effective date of this standard by one year. This deferral
resulted in ASU 2014-09 being effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. Entities have the option of
using either a full retrospective or a modified retrospective approach to adopt the guidance. The Company is currently assessing
the effects this guidance may have on its consolidated financial statements, as well as the method of transition that the Company
will use in adopting the new standard.
NOTE 2 — Cash, Cash Equivalents
and Restricted Cash
As of September 30,
2017, the Company maintained $1.8 million as restricted cash. The funds are being held in accordance with the Release Agreement
entered into with Mr. Podolski on February 1, 2017.
The following table
provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total
of the same such amounts shown in the statements of cash flows (in thousands):
|
|
September 30, 2017
|
|
|
September 30, 2016
|
|
Cash and cash equivalents
|
|
$
|
1,813
|
|
|
$
|
10,505
|
|
Restricted cash, current
|
|
|
916
|
|
|
|
—
|
|
Restricted cash, noncurrent
|
|
|
919
|
|
|
|
—
|
|
Total
|
|
$
|
3,648
|
|
|
$
|
10,505
|
|
NOTE 3 — Accrued Expenses
Accrued expenses consist
of the following (in thousands):
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Current accrued expenses:
|
|
|
|
|
|
|
|
|
Personnel related costs
|
|
$
|
1,045
|
|
|
$
|
512
|
|
Research and development costs
|
|
|
27
|
|
|
|
174
|
|
Other
|
|
|
120
|
|
|
|
93
|
|
Total current accrued expenses
|
|
$
|
1,192
|
|
|
$
|
779
|
|
|
|
|
|
|
|
|
|
|
Long-term accrued expenses:
|
|
|
|
|
|
|
|
|
Accrued severance
|
|
$
|
916
|
|
|
$
|
—
|
|
Total long-term accrued expenses
|
|
$
|
916
|
|
|
$
|
—
|
|
NOTE 4 — Loss Per Share
Basic loss per share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted
loss per share is computed using the average shares outstanding for the period and applying the treasury stock method to potentially
dilutive outstanding options, restricted stock units and warrants. In all applicable periods, all potential common stock equivalents
were anti-dilutive and, accordingly, were not included in the computation of diluted loss per share.
The following table
presents information necessary to calculate loss per share for the three and nine month periods ended September 30, 2017 and 2016
(in thousands, except per share amounts):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net loss
|
|
$
|
(1,615
|
)
|
|
$
|
(4,169
|
)
|
|
$
|
(9,723
|
)
|
|
$
|
(13,294
|
)
|
Average common shares outstanding
|
|
|
37,598
|
|
|
|
24,495
|
|
|
|
30,797
|
|
|
|
24,372
|
|
Basic and diluted loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.55
|
)
|
Potential common stock
of 2,698,082 common shares underlying stock options and restricted stock units and common shares underlying 3,839,666 stock purchase
warrants for the period ended September 30, 2017, were excluded from the above calculation of diluted loss per share because
they were anti-dilutive. Potential common stock of 2,792,357 common shares underlying stock options for the period ended September 30, 2016,
were also excluded from the above calculation of diluted loss per share because they were anti-dilutive.
NOTE 5 – Stock-Based Compensation
On February 1, 2017,
the Board of Directors (the “Board”) granted Larry Dillaha, the Company’s then interim President and Chief Executive
Officer a grant of 50,000 stock options to vest upon the successful completion of certain milestones. Additionally, the Board awarded
to Katherine Anderson, the Company’s Chief Financial Officer, 10,000 restricted shares of common stock per month on the first
day of each month beginning February 1, 2017 and ending on July 1, 2017, to vest on the last day of the month of grant. On February
13, 2017, the Board awarded Michael Wyllie, a non-employee director of the Company, and Larry Dillaha, a grant of 50,000 stock
options each. Both option awards will vest upon the successful completion of certain milestones. On February 13, 2017, the Board
awarded each board member a grant of 40,000 restricted stock units, to settle in shares of the Company’s common stock and
to vest in equal monthly installments over the three years following the date of grant. On September 15, 2017, the Board awarded
each board member a grant of 5,000 stock options each to vest in equal monthly installments over the next twelve months following
the date of grant. Additionally, during the nine month period ended September 30, 2017, 424,835 stock options either expired or
were forfeited.
NOTE 6 — Stockholders’ Equity
Offerings
On August 9,
2016, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Ladenburg
Thalmann & Co. Inc. (“Ladenburg”), pursuant to which we had the ability to issue and sell from time to time
through Ladenburg, as sales agent and/or principal, shares of our common stock having an aggregate offering price of up to
$10 million (the “ATM Shares”). Ladenburg had no obligation to sell on our behalf any specific number
or dollar amount of the ATM Shares, but Ladenburg, upon acceptance of written instructions from us, agreed to use
its commercially reasonable efforts consistent with its customary trading and sales practices, to sell the ATM Shares up to
the amount specified, and otherwise in accordance with the terms of a placement notice delivered to Ladenburg. Ladenburg
was entitled to receive a commission of 3% of the gross sales price of all ATM Shares sold through it under the Equity
Distribution Agreement. Effective May 9, 2017, the Company terminated the Sales Agreement and the related ATM Program.
No ATM Shares were
sold during the three month period ended September 30, 2017 due to the termination of the ATM program in May 2017. The table below
summarizes our ATM Shares sold during the nine month period ended September 30, 2017 (in thousands, except share and per share
amounts):
|
|
Nine Months
Ended
September 30,
2017
|
|
|
|
|
|
ATM Shares sold
|
|
|
849,157
|
|
Weighted average share price
|
|
$
|
1.20
|
|
Net proceeds, net of offering costs
|
|
$
|
1,021
|
|
Offering commissions to Ladenburg
|
|
$
|
32
|
|
On May 23, 2017, the
Company sold 2,744,125 shares of common stock and pre-funded Series C Warrants to purchase up to 2,245,875 shares of common stock
in an underwritten public offering to certain investors (the “May Public Offering”). Each share of common stock was
sold at a price of $0.60 and each Series C Warrant was issued with an exercise price of $0.60 per share of common stock, $0.60
of which was pre-funded at closing and $0.001 was payable upon exercise. This May Public Offering also included the issuance of
Series A Warrants to purchase 3,742,500 shares of our common stock at an initial exercise price of $0.84 per share and Series B
Warrants to purchase 2,495,000 shares of our common stock at an initial exercise price of $0.92 per share. Each share of common
stock and each pre-funded Series C Warrant to purchase a share of common stock were sold together with a Series A Warrant to purchase
0.75 share of common stock and a Series B Warrant to purchase 0.50 share of common stock. The net proceeds to the Company from
the sale of common stock and warrants, after deducting underwriting discounts and commissions and other offering expenses, were
approximately $2.5 million.
The Series A warrants
are exercisable, subject to certain limitations, upon issuance and expire five years from issuance and the Series B and Series
C warrants are exercisable, subject to certain limitations, upon issuance and expire two years from issuance. The Series A and
Series B warrants contain anti-dilution provisions that reduce the exercise price of the warrants if certain dilutive issuances
occur, subject to a floor of $0.17 per share. Each of the warrants contain a cashless exercise provision in the event there is
no effective registration statement covering the shares to be issued upon exercise of the warrants and a net cash settlement feature
at the option of the warrant holder in certain limited circumstances in which the Company fails to timely deliver registered common
shares upon a warrant exercise. Additionally, beginning 30 days after the issuance date, a Series B warrant holder is permitted
to effect a cashless exercise and receive a net number of shares equal to the product of (i) 200% of the applicable warrant exercise
percentage of the initial warrant amount and (ii) the quotient obtained by dividing (a) the difference obtained by subtracting
(x) the market price, from (y) the initial exercise price of the Series B Warrants by (b) the market price (the “Net Number
Cashless Exercise”).
Due to the net cash
settlement feature at the option of the warrant holder discussed above, the Series A and Series B warrants are classified as liabilities
under the caption “Warrant liability” in the accompanying balance sheets and recorded at estimated fair value at issuance
with any subsequent change in fair value of the outstanding warrants since issuance reflected in “Change in fair value of
warrant liability” in the accompanying statements of operations. Additionally, any share settlement of the warrant liability
upon a warrant exercise is reflected as a noncash settlement of the pro-rata share of the warrant liability and issuance of common
stock. See Note 7 to the financial statements included herein for discussion regarding the fair value of the warrants.
The following table
reflects the warrant activity of the Company for the nine month period ended September 30, 2017:
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
Shares of
Common Stock
|
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Issued
|
|
Balance, December 31, 2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Issuance of warrants
|
|
|
3,742,500
|
|
|
|
2,495,000
|
|
|
|
2,245,875
|
|
|
|
|
|
Series C Warrants exercised to purchase common stock for cash at $0.001 per share
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,245,875
|
)
|
|
|
2,245,875
|
|
Net Number Cashless Exercise of Series B Warrants
|
|
|
—
|
|
|
|
(2,397,834
|
)
|
|
|
—
|
|
|
|
7,719,958
|
|
Balance, September 30, 2017
|
|
|
3,742,500
|
|
|
|
97,166
|
|
|
|
—
|
|
|
|
|
|
Through November 13,
2017, an additional 13,833 Series B Warrants were exercised under the cashless alternative provision and as a result the Company
has issued 59,771 shares of common stock.
On July 24, 2017, the
Company filed a shelf registration statement on Form S-3 (File No. 333-219428, the “July 2017 Registration Statement”)
to permit the continued exercise of the Series A Warrants and Series B Warrants following the expiration, on that date, of the
Company’s prior Registration Statement on Form S-3, as amended (File No. 333-197253). The July 2017 Registration Statement
was declared effective by the SEC on August 4, 2017. Between the expiration of the prior registration statement and the effectiveness
of the July 2017 Registration Statement, exercises of the Series A Warrants and Series B Warrants continued to be permitted under
the prior registration statement pursuant to Rule 415(a)(5) under the Securities Act of 1933, as amended.
NOTE 7 — Fair Value Measurements
The FASB has established
a framework for measuring fair value in generally accepted accounting principles. That framework provides a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1.
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2.
Inputs to the valuation methodology include:
|
·
|
Quoted prices for similar assets or liabilities in active markets
|
|
|
|
|
|
Quoted prices for identical or similar assets or liabilities in inactive markets
|
|
|
|
|
·
|
Inputs other than quoted prices that are observable for the asset or liability
|
|
|
|
|
·
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means
|
If the asset
or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the
asset or liability.
Level 3.
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset or liability’s
fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable
inputs.
The table below presents
our assets and liabilities that are measured at fair value on a recurring basis at September 30, 2017 and are categorized using
the fair value hierarchy (in thousands):
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents
|
|
$
|
1,813
|
|
|
$
|
1,813
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
|
$
|
1,835
|
|
|
$
|
1,835
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Warrant liability
|
|
$
|
(1,716
|
)
|
|
$
|
—
|
|
|
$
|
(1,716
|
)
|
|
$
|
—
|
|
The table below presents
our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2016 and are categorized using
the fair value hierarchy (in thousands):
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents
|
|
$
|
8,688
|
|
|
$
|
8,688
|
|
|
$
|
—
|
|
|
$
|
—
|
|
All cash and cash equivalents and restricted
cash as of September 30, 2017 and December 31, 2016 were held in accounts backed by U.S. government securities.
On May 23, 2017, as
a result of the May Public Offering (described in Note 6 to the financial statements included herein), the Company issued Series
A, Series B and Series C warrants that include a net cash settlement feature at the option of the warrant holder in certain limited
circumstances in which the Company fails to timely deliver registered common shares upon a warrant exercise. All Series C warrants
were exercised in June 2017. The Series A and Series B warrants are classified as liabilities under the caption “Warrant
liability” in the accompanying balance sheets and recorded at estimated fair value at issuance with any subsequent change
in fair value of the outstanding warrants since issuance reflected in “Change in fair value of warrant liability” in
the accompanying statements of operations. The fair value of the Series A and Series B warrant liability at the issue date was
$2,419,000 after giving effect to anti-dilution adjustments under the assumption that the anti-dilution mechanism contained in
the Series A and Series B warrants was in effect. The following summarizes the change in the Warrant liability for the nine months
ended September 30, 2017 (in thousands):
|
|
Series A
Warrants
|
|
|
Series B
Warrants
|
|
|
Total
|
|
Warrant liability at date of issue
|
|
$
|
(1,831
|
)
|
|
$
|
(588
|
)
|
|
$
|
(2,419
|
)
|
Share settlement due to warrant exercises
|
|
|
-
|
|
|
|
568
|
|
|
|
568
|
|
Change in fair value
|
|
|
134
|
|
|
|
1
|
|
|
|
135
|
|
Warrant liability at September 30, 2017
|
|
$
|
(1,697
|
)
|
|
$
|
(19
|
)
|
|
$
|
(1,716
|
)
|
The Company will continue
to adjust the Warrant liability for changes in fair value of the outstanding warrants until the earlier of the exercise of the
warrants, modification of the warrants, or expiration of the warrants.
The fair value of the
Company’s warrant liability recorded in the Company’s financial statements was determined using the Monte Carlo simulation
valuation method with the quoted market price of the Company’s common stock, expected volatility of the Company’s stock,
no dividend yield, an expected life based on the remaining contractual term of the outstanding warrants and a risk-free interest
rate based on USD overnight indexed swaps with a maturity equivalent to the warrants’ expected life.
The Company calculated
the estimated fair value of the Series A and Series B warrants on the issuance date and at September 30, 2017 using the following
weighted average assumptions:
|
|
Issue Date
|
|
|
|
|
|
|
(May 23, 2017)
|
|
|
September 30, 2017
|
|
Risk-free interest rate
|
|
|
1.46
|
%
|
|
|
1.99
|
%
|
Contractual term
|
|
|
3.3 years
|
|
|
|
4.6 years
|
|
Expected volatility
|
|
|
85.8
|
%
|
|
|
117.3
|
%
|
NOTE 8 — Commitments and Contingencies
None.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
The following discussion
contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that involve risk
and uncertainties. Any statements contained in this quarterly report that are not statements of historical fact may be forward-looking
statements. When we use the words "may," "anticipates," "believes," "plans," "expects"
and similar expressions, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties
which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking
statements. The following discussion of financial condition should be read in conjunction with the accompanying consolidated financial
statements and related notes.
Repros Therapeutics
Inc.
The Company was organized
on August 20, 1987. We are a biopharmaceutical company focused on the development of new drugs to treat hormonal and reproductive
system disorders.
We are developing Proellex®,
an orally administered selective blocker of the progesterone receptor in women, for the treatment of uterine fibroids and endometriosis.
Uterine fibroids and endometriosis affect millions of women of reproductive age. Proellex® has shown statistically significant
results in previous Phase 2 studies for uterine fibroids and endometriosis. We completed a low dose escalating study as permitted
by the Food and Drug Administration (“FDA”) in late 2011, to determine both signals of efficacy and safety for low
oral doses of the drug. There was no evidence of elevations of liver enzymes over baseline, suggesting these lower doses avoid
the type of adverse events seen at much higher doses in earlier studies. On March 17, 2014, we announced that the FDA indicated
that we may proceed to conduct Phase 1 and Phase 2 studies of low dose oral Proellex® for uterine fibroids and endometriosis
while remaining on partial clinical hold. This guidance indicated that the highest allowed dose will be 12 mg daily. On December
29, 2014, we announced that we have initiated a Phase 2B study for low dose oral Proellex® in the treatment of uterine fibroids.
This study was fully enrolled in January 2016 and on November 14, 2016, we announced positive clinical data from this study after
two 18-week courses of treatment as compared to placebo. On April 10, 2017, the Company announced they had a meeting with the FDA
to discuss the progress and next steps in the development of Proellex® for the treatment of uterine fibroids. Shortly before
the meeting, the Company was notified that the meeting would be a type C/Guidance meeting, rather than a type B/End of phase 2
meeting as previously anticipated. At the meeting, the FDA confirmed that Proellex® will continue on the current partial clinical
hold while they consult with liver experts within the FDA regarding previously disclosed effects on the liver. On July 17, 2017,
the Company announced that it received preliminary feedback from the FDA on the oral Proellex® clinical development program.
The Proellex
®
program will remain on partial clinical hold, and based upon the FDA’s review of all the existing
liver function safety data, the FDA has indicated that the Company will be required to compile a large pre-approval safety data
base to support future development.
The Company has an
active Investigational New Drug Application (“IND”) for the vaginal delivery of Proellex® for the treatment of
uterine fibroids. Since the clinical hold relates only to oral delivery of Proellex®, this IND has no clinical hold issues.
In the first quarter of 2012, we initiated a Phase 2 vaginal administration study for the treatment of uterine fibroids and subsequently
reported the final study results in January 2013. We held an end of Phase 2 meeting with the FDA in May 2013, to discuss a Phase
3 study design for vaginally delivered Proellex as a treatment for uterine fibroids. The FDA recommended that a Phase 2B study
should be conducted prior to commencing a Phase 3 program. On December 29, 2014, we announced that we have initiated a Phase 2B
study for vaginally delivered Proellex® in the treatment of uterine fibroids. This study was fully enrolled in January 2016
and on November 14, 2016, we announced positive clinical data from this study after two 18-week courses of treatment as compared
to placebo. In light of the FDA guidance on the oral Proellex® development program, the Company is assessing increasing its
focus on the vaginal delivery of Proellex®.
We are also developing
enclomiphene, a single isomer of clomiphene citrate which is an orally active proprietary small molecule compound. Enclomiphene
is for the treatment of secondary hypogonadism in overweight men wishing to restore normal testicular function. Men with secondary
hypogonadism exhibit low testosterone levels due to under stimulated testes but they are generally fertile. Enclomiphene is designed
to treat the underlying mechanism, insufficient stimulation of the testes by the pituitary, which causes secondary hypogonadism.
Secondary hypogonadism due to being overweight or obese is the single greatest cause of hypogonadism in general.
In December 2011, we
completed a Phase 2B study of enclomiphene in men with secondary hypogonadism, but naïve to testosterone treatment, at the
recommendation of the FDA. Top line results of this study demonstrated that enclomiphene was generally well tolerated compared
to placebo and that there were no drug related serious adverse events that led to discontinuation. We met with the FDA in May 2012
to discuss the design of pivotal Phase 3 efficacy studies for enclomiphene as well as the components of the overall drug development
program required for a New Drug Application (“NDA”) submission and agreed on registration requirements for enclomiphene
oral therapy for the treatment of secondary hypogonadism. In July 2012, we announced that we reached an agreement with the FDA
for the design of the pivotal efficacy studies for enclomiphene for the treatment of secondary hypogonadism. The pivotal studies
were conducted under a Special Protocol Assessment (“SPA”). We have completed both Phase 3 pivotal efficacy studies.
On March 27, 2013, we announced that the top-line results from our first pivotal Phase 3 study, ZA-301, met both co-primary
endpoints mandated by the FDA, and we announced on September 16, 2013, that we met both co-primary endpoints in the second pivotal
study, ZA-302. Additionally, on September 16, 2013, we announced the results from ZA-300, a six-month safety study. This study
identified no new safety issues. On October 22, 2013, we announced that we received guidance from the FDA instructing the Company
to request a meeting to discuss the adequacy of studies ZA-301 and ZA-302. In addition to this guidance, the FDA further noted
that they would allow us to run head-to-head studies against approved testosterone replacement products. These head-to-head studies,
ZA-304 and ZA-305, were initiated in January 2014 and subsequently completed in September and August 2014, respectively. Both of
these head-to-head studies achieved superiority for both co-primary endpoints and most secondary endpoints as compared to the approved
testosterone replacement product. On October 21, 2014, we announced the results from ZA-303, a 52 week, single-blind, placebo-controlled
Phase 3 study to evaluate the effects on bone mineral density. In this study, no new safety signals were identified, including
no evidence of negative effects on bone mineral density. On February 2, 2015, we announced that we electronically submitted our
NDA to the FDA for enclomiphene. The FDA accepted the NDA for review on April 1, 2015 and later assigned a Prescription Drug User
Fee (“PDUFA”) goal date of November 30, 2015. In addition, the Division of Bone, Reproductive and Urologic Products
(the “Division”) of the FDA scheduled an advisory committee meeting to review the NDA for November 3, 2015. However,
the Division subsequently cancelled the scheduled advisory committee meeting due to questions that arose late in the review regarding
the bioanalytical method validation that could affect interpretability of certain pivotal study data. On December 1, 2015, we announced
that we had received a Complete Response Letter (“CRL”) from the FDA. A CRL informs companies that an NDA cannot be
approved in its present form. In the CRL, the FDA stated that, based on recent scientific developments, the design of the enclomiphene
Phase 3 studies is no longer adequate to demonstrate clinical benefit and recommended that Repros conduct an additional Phase 3
study or studies to support approval in the target population. The FDA also noted concerns regarding study entry criteria, titration
and bioanalytical method validation in the Phase 3 program.
Subsequently, on February
4, 2016, the Company attended a meeting with the FDA reviewers and senior leaders to discuss resolution of issues identified during
the NDA review. The meeting covered a broad range of topics surrounding the NDA data as well as emerging agency and expert thinking
regarding the treatment of hypogonadism. The Company believes based on the meeting that the FDA is not closed to considering secondary
hypogonadism as an indication. Additionally, in January 2016, the Company initiated a Phase 2 double-blind, placebo controlled,
proof of concept study, ZA-205, in obese secondary hypogonadal men to assess the impact of enclomiphene on metabolic parameters
and quality of life under a diet and exercise regimen. This study was fully enrolled in February 2016 and on August 15, 2016, we
reported six month interim results from this study.
Additionally, on September
12, 2016, we reported that we successfully submitted a European centralized marketing authorization application (“MAA”)
for enclomiphene for the treatment of secondary hypogonadism. This MAA was subsequently accepted by the European Medicines Agency
(“EMA”) which, as previously reported, has assigned the United Kingdom as the primary rapporteur and France as the
co-rapporteur for the application review. As part of the ongoing review process, the Company has filed responses to the EMAs questions
in the third quarter of 2017.
On December 6, 2016,
the Company participated in the industry presentation at the Bone, Reproductive and Urologic Drugs’ Advisory Committee meeting.
The advisory panel provided the FDA with advice regarding a clinical and regulatory path to approval for products, such as enclomiphene,
in subjects with obesity-related hypogonadism who wish to maintain spermatogenesis. The panel voted 16 to 5 that the achievement
of testosterone improvement while maintaining evidence of spermatogenesis was not sufficient, in and of itself, to provide evidence
of clinical benefit. At the meeting, numerous panel members suggested that an additional endpoint related to symptoms should be
assessed.
Liquidity
On August 9,
2016, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Ladenburg
Thalmann & Co. Inc. (“Ladenburg”), pursuant to which we had the ability to issue and sell from time to time
through Ladenburg, as sales agent and/or principal, shares of our common stock having an aggregate offering price of up to
$10 million (the “ATM Shares”). Ladenburg had no obligation to sell on our behalf any specific number or
dollar amount of the ATM Shares, but Ladenburg, upon acceptance of written instructions from us, agreed to use its
commercially reasonable efforts consistent with its customary trading and sales practices, to sell the ATM Shares up to the
amount specified, and otherwise in accordance with the terms of a placement notice delivered to Ladenburg. Ladenburg
was entitled to receive a commission of 3% of the gross sales price of all ATM Shares sold through it under the Equity
Distribution Agreement. Effective May 9, 2017, the Company terminated the Sales Agreement and the related ATM Program. During
the nine month period ended September 30, 2017, we sold 849,157 ATM Shares at a weighted average share price of $1.20 for
proceeds of approximately $1,021,000, net of expenses including approximately $32,000, in commissions to Ladenburg.
On May 23, 2017, the
Company sold 2,744,125 shares of common stock and pre-funded Series C Warrants to purchase up to 2,245,875 shares of common stock
in an underwritten public offering to certain investors (the “May Public Offering”). Each share of common stock was
sold at a price of $0.60 and each Series C Warrant was issued with an exercise price of $0.60 per share of common stock, $0.60
of which was pre-funded at closing and $0.001 was payable upon exercise. This May Public Offering also included the issuance of
Series A Warrants to purchase 3,742,500 shares of our common stock at an initial exercise price of $0.84 per share and Series B
Warrants to purchase 2,495,000 shares of our common stock at an initial exercise price of $0.92 per share. Each share of common
stock and each pre-funded Series C Warrant to purchase a share of common stock were sold together with a Series A Warrant to purchase
0.75 share of common stock and a Series B Warrant to purchase 0.50 share of common stock. The net proceeds to the Company from
the sale of common stock and warrants, after deducting underwriting discounts and commissions and other offering expenses, were
approximately $2.5 million.
As of September 30,
2017, we had accumulated losses of $329.3 million, approximately $1.8 million in cash and cash equivalents, and accounts payable
and accrued expenses of approximately $3.4 million, in the aggregate. Included in our accrued expenses is $1.8 million related
to the accrued severance payments due Mr. Podolski upon his termination, which are anticipated to be paid in the first quarter
of 2018 and 2019 with our restricted cash of $1.8 million. We anticipate that our current liquidity will be sufficient to continue
the development of our product candidates (to the extent
we deem appropriate) and meet our obligations as they become due through the end of 2017. We continue to explore
potential additional financing alternatives, including corporate partnering opportunities, that would provide sufficient funds
to enable us to continue to develop our two product candidates through FDA approval; however, there can be no assurance that we
will be successful in raising any such additional funds on a timely basis or at all. The foregoing matters raise substantial doubt
about our ability to continue as a going concern.
Nasdaq Listing
On November 8, 2017,
we received written notification from the Listing Qualifications Staff (the “Staff”) of The NASDAQ Stock Market LLC
(“Nasdaq”) indicating that, based upon our continued non-compliance with the minimum stockholders’ equity requirement
for continued listing on The NASDAQ Capital Market, as set forth in NASDAQ Marketplace Rule 5550(b)(2) (the “Stockholders’
Equity Rule”), the Staff had determined to delist our common stock from Nasdaq (the “Staff Determination”) unless
we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). We will have until November 15, 2017 to
request a hearing.
We intend to timely
request a hearing before the Panel, which request will stay any suspension or delisting action by Nasdaq at least until the hearing
process concludes and any extension granted by the Panel expires. At the hearing, we plan to present our plan to evidence compliance
with the Stockholders’ Equity Rule, and request an extension of time within which to do so.
The November 8, 2017
notice has no immediate effect on the listing of our common stock and the common stock will continue to trade on the NASDAQ Capital
Market under the symbol “RPRX” at least until the hearing process concludes and any extension granted by the Panel
expires.
There can be no assurances that the Panel
will grant our request for continued listing or that we will be able to evidence compliance with all applicable requirements for
continued listing on The NASDAQ Capital Market within any extension of time that may be granted by the Panel.
Proellex®
Product Overview
Proellex®, our
product candidate for female reproductive health, is a new chemical entity that acts as a selective blocker of the progesterone
receptor and is being developed for the treatment of symptoms associated with uterine fibroids and endometriosis. The National
Uterine Fibroids Foundation estimates that 80% of all women in the U.S. have uterine fibroids, and one in four of these women have
symptoms severe enough to require treatment. According to the Endometriosis Association, endometriosis affects 6.3 million women
in the U.S. and Canada and millions more worldwide.
The current standards
of care for uterine fibroids and endometriosis consist of surgery or short-term treatment with gonadotropin-releasing hormone (“GnRH”)
agonists drugs, such as Lupron®. GnRH agonists induce a low estrogen, menopausal-like state and promote bone loss and are not
recommended for use for more than six months without add-back hormonal therapy.
We have conducted numerous
studies with Proellex® dosing approximately 900 women with the drug. All Proellex® studies completed to date exhibited
strong efficacy signals, whether in uterine fibroids or endometriosis. In a 120 patient study of Proellex® as a treatment of
uterine fibroids conducted in the United States (roughly 40 subjects per arm), both a 12.5 and 25 mg dose of Proellex® were
compared to placebo. In this study each of the 12.5 and 25 mg doses achieved highly statistically significant results when compared
to placebo when menstrual bleeding was assessed (p<0.0001). The two doses also achieved highly statistically significant improvement
in quality of life measures using the Uterine Fibroid Symptom Quality of Life questionnaire developed and validated by Georgetown
University and used in the development of device like treatments of uterine fibroids such as uterine artery embolization. There
was no statistical difference in efficacy measures between the two doses. Importantly, in the Phase 2 U.S. trial, a significant
percentage of women stopped menstruating (amenorrhea). Over 80% of women on both the 12.5 and 25 mg doses exhibited amenorrhea
during the three month trial, whereas all women on placebo exhibited at least one menses. The key symptom of uterine fibroids is
excessive menstrual bleeding. The induction of amenorrhea continues to be the primary endpoint in our uterine fibroids clinical
studies.
Up until the summer
of 2009, all side effects exhibited in the studies were considered manageable and the benefit of Proellex® far outweighed the
risk. However, in Phase 3 efficacy and larger Phase 3 safety studies in diverse populations, a small number of subjects exhibited
serious adverse effects associated with elevated liver enzymes. As a result of these findings, we elected to stop the trials and
the FDA subsequently placed Proellex® on full clinical hold. All women that experienced elevated liver enzymes and returned
for follow-up visits returned to baseline conditions with no overnight hospitalization necessary. An analysis of all the subjects
that experienced such serious adverse effects showed that the effect only occurred in a small percentage of subjects that were
exposed to the 50 mg dose of the drug for any period of time. Based on these findings, we petitioned the FDA to allow us to conduct
a low dose study to demonstrate both safety and signals of efficacy in low oral doses of Proellex®, up to 12 mg administered
daily. The FDA upgraded the full clinical hold to a partial hold to allow the low dose study to be conducted. In addition, we are
exploring vaginal delivery as an alternative administrative route to bypass first-pass liver effects and reduce systemic exposure.
Low Dose Oral Study
Pursuant to the terms
of the partial clinical hold currently in place as a result of the liver toxicity exhibited by Proellex®, the FDA allowed us
to run a single study to test low oral doses of Proellex® for signals of safety and efficacy. The study tested five different
doses of Proellex® (1, 3, 6, 9 and 12 mg), with 1 mg being the first dose tested. Each dose was then compared to placebo with
weekly assessments of liver function during both the placebo and drug period. Subjects were dosed with the active drug for 10 weeks,
which allowed for adequate time to determine the impact of a given dose on trends in liver function. Each dose was tested in up
to 12 different subjects and assessment of pharmacokinetic parameters was obtained at the start of dosing and the end of the dosing
period to determine overall and maximum drug exposure for a given dose. We also monitored changes in menstrual bleeding patterns
and ovulation as well as changes in endometrial thickness. The FDA required that an independent Drug Safety Monitoring Board be
established and that the informed consent clearly state the liver toxicity previously experienced with Proellex®. We have completed
this study and have announced that there was no evidence of elevations of liver enzymes over baseline, suggesting these lower doses
avoid the type of adverse events seen at much higher doses in earlier studies.
On July 16, 2012, we
announced that we held a teleconference with the FDA to discuss the development of low dose oral Proellex® as a treatment for
endometriosis. Subsequently, on October 8, 2012, we announced that the FDA has agreed to reclassify the full clinical hold to a
partial clinical hold on low dose oral Proellex® to allow us to conduct a Phase 2 study in the treatment of endometriosis.
We initiated this 60 subject, four month active dosing study in November 2012 and it was fully enrolled in January 2016. On September
7, 2016, we announced positive clinical data for the first course of treatment in this Phase 2 study.
On October 31, 2013,
the Company held a meeting with the FDA to discuss the clinical development plan for low dose oral Proellex® in the treatment
of uterine fibroids. During the meeting, the FDA provided guidance for endpoints it believed acceptable for the treatment of uterine
fibroids in an efficacy study and instructed the Company to submit a request for lifting the full clinical hold. The Company has
followed the FDA’s recommendations and submitted the study protocol and the request for the full hold lift. Additionally,
on March 17, 2014, we announced that the FDA indicated that we may proceed to conduct Phase 1 and Phase 2 studies of low dose oral
Proellex® for endometriosis and uterine fibroids while remaining on partial clinical hold. This guidance indicated that the
highest allowed dose will be 12 mg daily. On December 29, 2014, we announced that we have initiated a Phase 2B study for low dose
oral Proellex® in the treatment of uterine fibroids. This study was fully enrolled in January 2016 and on November 14, 2016,
we announced positive clinical data from this study after two 18-week courses of treatment as compared to placebo. On January 30,
2017, we announced the FDA has granted the Company an end of phase 2 meeting to discuss the phase 3 requirements for Proellex in
the treatment of uterine fibroids. Subsequently, on April 10, 2017, the Company announced that it had a meeting with the FDA to
discuss the progress and next steps in the development of Proellex® for the treatment of uterine fibroids. Shortly before the
meeting, the Company was notified that the meeting would be a type C/guidance meeting, rather than a type B/end of phase 2 meeting
as previously anticipated. At the meeting, the FDA confirmed that Proellex® will continue on the current partial clinical hold
while they consult with liver experts within the FDA regarding previously disclosed effects on the liver. Further, the FDA agreed
to accept additional information from the Company and its panel of liver experts for consideration by the FDA’s internal
advisory liver team. On July 17, 2017, the Company announced that it received preliminary feedback from the FDA on the oral Proellex®
clinical development program. The Proellex
®
program will remain on partial clinical hold, and based upon the FDA’s
review of all the existing liver function safety data, the FDA has indicated that the Company will be required to compile a large
pre-approval safety data base to support future development.
Vaginal Administration
We are assessing vaginal
administration of Proellex® to avoid first pass liver effects and achieve higher reproductive tract concentrations of the drug
while minimizing systemic exposure. We reported results from two in vivo animal studies which confirmed reduced maximum circulating
concentrations of the drug when administered vaginally, as well as efficacy signals at substantially lower doses than oral administration.
The Company has an active IND for the vaginal delivery of Proellex® for the treatment of uterine fibroids. Since the clinical
hold relates only to the oral delivery of Proellex®, this IND has no clinical hold issues. In the first quarter of 2012, we
initiated a Phase 2 vaginal administration study for the treatment of uterine fibroids. In January 2013, we reported the final
study results which indicated the 12 mg dose achieved statistically significant improvement in menstrual bleeding, uterine fibroid
symptoms and reduction in fibroid volume even with the low number of subjects enrolled into the study (n=12 @ 12 mg). Based on
these findings, the Company believes the 12 mg dose is appropriate for further development. We held an end of Phase 2 meeting with
the FDA in May 2013, to discuss a Phase 3 study design for the vaginally delivered Proellex as a treatment for uterine fibroids.
The FDA recommended that a Phase 2B study should be conducted prior to commencing a Phase 3 program. On December 29, 2014, we announced
that we have initiated a Phase 2B study for vaginally delivered Proellex® in the treatment of uterine fibroids. This study
was fully enrolled in January 2016 and on November 14, 2016, we announced positive clinical data from this study after two 18-week
courses of treatment as compared to placebo. In light of the FDA guidance on the oral Proellex® development program, the Company
is assessing increasing its focus on the vaginal delivery of Proellex®.
Enclomiphene
Product Overview
We are developing enclomiphene,
a single isomer of clomiphene citrate which is an orally active proprietary small molecule compound. Enclomiphene is for the treatment
of secondary hypogonadism in overweight men wishing to restore normal testicular function. Men with secondary hypogonadism exhibit
low testosterone levels due to under stimulated testes but they are generally fertile. Enclomiphene is designed to treat the underlying
mechanism, insufficient stimulation of the testes by the pituitary, which causes secondary hypogonadism. Secondary hypogonadism
due to being overweight or obese is the single greatest cause of hypogonadism in general.
Testosterone is an
important male hormone. Testosterone deficiency in men is linked to several negative physical and mental conditions, including
loss of muscle tone, reduced sexual desire and deterioration of memory and certain other cognitive functions. Testosterone production
normally decreases as men age and this decline can be accelerated by obesity, sometimes leading to testosterone deficiency. The
leading therapy for low testosterone is AndroGel®, a commercially available testosterone replacement marketed by AbbVie Inc.
(“AbbVie”) for the treatment of low testosterone, which we believe has had and continues to have significant sales
in North America.
Based on our own clinical
trial screening data, we believe over 70% of men that have low testosterone suffer from secondary hypogonadism, a pituitary defect
which is characterized by suboptimal levels of LH (luteinizing hormone) and FSH (follicle stimulating hormone). LH and FSH are
the pituitary hormones that stimulate testicular testosterone and sperm production, respectively. Men with secondary hypogonadism
can be readily distinguished from those that have primary testicular failure via assessment of the levels of secretions of pituitary
hormones, as men with primary testicular failure experience elevated secretions of pituitary hormones. In secondary hypogonadism,
the low levels of LH and FSH fail to provide adequate hormone signaling to the testes, causing testosterone levels to drop to a
level where we believe pituitary secretions fall under the influence of estrogen, which is enhanced in obese men, thus further
suppressing the testicular stimulation from the pituitary.
Enclomiphene acts centrally
to restore testicular function and, hence, normal testosterone in the body. The administration of exogenous testosterone can restore
serum testosterone levels, but does not restore testicular function and thereby generally leads to the cessation of, or significant
reduction in, sperm production. Enclomiphene, by contrast, restores levels of both LH and FSH, which stimulate testicular testosterone
and sperm production, respectively.
Treatment for Secondary Hypogonadism in Men Wishing to Preserve
Testicular Function (Reproductive Status)
On November 8, 2010,
we held a Type B meeting with the FDA to discuss whether the FDA would review our protocols for a Phase 3 trial of enclomiphene
in men with secondary hypogonadism under an SPA. In the meeting, the FDA recommended that a Phase 2B study in men with secondary
hypogonadism but naïve to testosterone treatment be conducted if we desired the protocols to be reviewed under an SPA. The
FDA further opined that such Phase 2B study would provide for a more solid data base for design of Phase 3 studies and eventual
approval of such studies under an SPA.
We completed the Phase
2B trial which consisted of four arms; placebo, two doses of enclomiphene and topical testosterone. In this study, at baseline
the men exhibited morning testosterone less than 250 ng/dl and there was no statistical difference between the groups in testosterone
at baseline. At the end of the three month dosing period, median morning testosterone levels were placebo, 196 ng/dl, 12.5 mg enclomiphene,
432 ng/dl, 25 mg enclomiphene, 416 ng/dl and Testim®, 393 ng/dl. A comparison of final median morning testosterone in all three
of the active arms to placebo showed them to be highly statistically different and there was no statistical difference observed
between these active arms. This trial also showed that enclomiphene was able to maintain sperm counts in men being treated for
their low testosterone levels, whereas Testim® resulted in suppressed sperm levels.
On July 9, 2012, we
announced that we reached an agreement with the FDA for the design of the pivotal efficacy studies for enclomiphene for the treatment
of secondary hypogonadism. The pivotal studies were conducted under an SPA. On March 27, 2013, we announced that the top-line
results from our first pivotal Phase 3 study, ZA-301, met both co-primary endpoints mandated by the FDA and we announced on
September 16, 2013, that we met both co-primary endpoints in the second pivotal study, ZA-302.
The 500 subject, six
month, open label safety study, ZA-300, completed enrollment in February 2013 at 28 U.S. clinical sites. On September 16, 2013,
we reported top-line results of this study. Additionally, we completed enrollment into a one year, 150 subject DEXA study, ZA-303,
in January 2013 at 10 U.S. clinical sites. On October 21, 2014, we announced that this study identified no new safety signals,
including no evidence of negative effects on bone mineral density.
On October 22, 2013,
we announced that we received guidance from the FDA instructing the Company to request a meeting to discuss the adequacy of studies
ZA-301 and ZA-302. In addition to this guidance, the FDA further noted they would allow us to run head-to-head studies against
approved testosterone replacement products. These head-to-head studies, ZA-304 and ZA-305, were initiated in January 2014 and subsequently
completed in September and August 2014, respectively. Both of these head-to-head studies achieved superiority for both co-primary
endpoints and most secondary endpoints as compared to the approved testosterone replacement product.
On February 2, 2015,
we announced that we electronically submitted our NDA to the FDA for enclomiphene. The FDA accepted the NDA for review on April
1, 2015 and later assigned a PDUFA goal date of November 30, 2015. In addition, the Division of the FDA scheduled an advisory committee
meeting to review the NDA for November 3, 2015. However, the Division subsequently cancelled the scheduled advisory committee meeting
due to questions that arose late in the review regarding the bioanalytical method validation that could affect interpretability
of certain pivotal study data. On December 1, 2015, we announced that we had received a CRL from the FDA. A CRL informs companies
that an NDA cannot be approved in its present form. In the CRL, the FDA stated that, based on recent scientific developments, the
design of the enclomiphene Phase 3 studies is no longer adequate to demonstrate clinical benefit and recommended that Repros conduct
an additional Phase 3 study or studies to support approval in the target population. The FDA also noted concerns regarding study
entry criteria, titration and bioanalytical method validation in the Phase 3 program. Subsequently, on February 4, 2016, the Company
attended a meeting with the FDA reviewers and senior leaders to discuss resolution of issues identified during the NDA review.
The meeting covered a broad range of topics surrounding the NDA data as well as emerging agency and expert thinking regarding the
treatment of hypogonadism. The Company believes based on the meeting that the FDA is not closed to considering secondary hypogonadism
as an indication. Additionally, in January 2016, the Company initiated a Phase 2 double-blind, placebo controlled, proof of concept
study, ZA-205, in obese secondary hypogonadal men to assess the impact of enclomiphene on metabolic parameters and quality of life
under a diet and exercise regimen. This study was fully enrolled in February 2016 and on August 15, 2016, we reported six month
interim results from this study.
Additionally, on September
12, 2016, we reported that we successfully submitted a European centralized marketing authorization application (“MAA”)
for enclomiphene for the treatment of secondary hypogonadism. This MAA was subsequently accepted by the European Medicines Agency
(“EMA”) which, as previously reported, has assigned the United Kingdom as the primary rapporteur and France as the
co-rapporteur for the application review. As part of the ongoing review process, the Company has filed responses to the EMAs questions
in the third quarter of 2017.
On December 6, 2016,
the Company participated in the industry presentation at the Bone, Reproductive and Urologic Drugs’ Advisory Committee meeting.
The advisory panel provided the FDA with advice regarding a clinical and regulatory path to approval for products, such as enclomiphene,
in subjects with obesity-related hypogonadism who wish to maintain spermatogenesis. The panel voted 16 to 5 that the achievement
of testosterone improvement while maintaining evidence of spermatogenesis was not sufficient, in and of itself, to provide evidence
of clinical benefit. At the meeting, numerous panel members suggested that an additional endpoint related to symptoms should be
assessed.
Business Strategy
The Company
is assessing increasing its focus on the vaginal delivery of Proellex® in the treatment of uterine fibroids. We
anticipate that our current liquidity will be sufficient to continue the development of our product candidates (to the extent
we deem appropriate) and meet our obligations as they become due through the end of 2017. We continue to explore potential
additional financing alternatives, including corporate partnering opportunities, that would provide sufficient funds to
enable us to continue to develop our two product candidates through FDA approval; however, there can be no assurance that we
will be successful in raising any such additional funds on a timely basis or at all.
Corporate Information
We were organized as
a Delaware corporation in August 1987. Our principal executive offices are located at 2408 Timberloch Place, Suite B-7,
The Woodlands, Texas, 77380, and our telephone number is (281) 719-3400. We maintain an internet website at www.reprosrx.com. The
information on our website or any other website is not incorporated by reference into this quarterly report and does not constitute
a part of this quarterly report. Our Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and all amendments
to such reports are made available free of charge through the Investor Relations section of our website as soon as reasonably practicable
after they have been filed or furnished with the Securities and Exchange Commission.
General
We currently have six
full-time employees. We utilize the services of contract research organizations, contract manufacturers and various consultants
to assist us in performing clinical and regulatory services for the clinical development of our products. We are substantially
dependent on our various contract groups to adequately perform the activities required to obtain regulatory approval of our products.
We have accumulated
net operating losses through September 30, 2017 and the value of the tax asset associated with these accumulated net operating
losses may be substantially diminished in value due to various tax regulations, including change in control provisions in the tax
code. Additionally, during 2013, the Company completed an analysis of its section 382 limit. Based on this analysis, the Company
concluded that the amount of net operating loss (“NOL”) carryforwards and the credits available to offset taxable income
is limited under section 382. See “Critical Accounting Policies and the Use of Estimates – Income Taxes,” below.
Losses have resulted
principally from costs incurred in conducting clinical trials for our product candidates, in research and development activities
related to efforts to develop our products and from the associated administrative costs required to support those efforts. There
can be no assurance that we will be able to successfully complete the transition from a development stage company to the successful
introduction of commercially viable products. Our ability to achieve profitability will depend on, among other things, successfully
completing the clinical development of our products in a reasonable time frame and at a reasonable cost, obtaining regulatory approvals,
establishing marketing, sales and manufacturing capabilities or collaborative arrangements with others that possess such capabilities,
and, if applicable, continuing to raise sufficient funds to finance our activities. There can be no assurance that we will be able
to achieve profitability.
Critical Accounting Policies and the
Use of Estimates
The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Accrued Expenses
We estimate accrued
expenses as part of our process of preparing financial statements. Examples of areas in which subjective judgments may be required
include costs associated with services provided by contract organizations for clinical trials, preclinical development and manufacturing
of clinical materials. We accrue for costs incurred as the services are being provided by monitoring the status of the trials or
services provided and the invoices received from our external service providers. In the case of clinical trials, a portion of the
estimated cost normally relates to the projected cost to treat a patient in our trials, and we recognize this cost over the estimated
term of the study based on the number of patients enrolled in the trial on an ongoing basis, beginning with patient enrollment.
As actual costs become known to us, we adjust our accruals. To date, our estimates have not differed significantly from the actual
costs incurred. However, subsequent changes in estimates may result in a material change in our accruals, which could also materially
affect our balance sheet and results of operations.
Research and Development
Expenses
Research and development,
or R&D, expenses include salaries and related employee expenses, contracted regulatory affairs activities, insurance coverage
for clinical trials and prior product sales, contracted research and consulting fees, facility costs and internal research and
development supplies. We expense research and development costs in the period they are incurred. These costs consist of direct
and indirect costs associated with specific projects as well as fees paid to various entities that perform research on our behalf.
Warrant Liability
In May 2017, we sold
shares of common stock and pre-funded Series C Warrants to purchase common stock in an underwritten public offering which also
included the issuance of Series A and Series B Warrants to purchase common stock. Due to a net cash settlement feature at the option
of the warrant holder in each of the Series A and Series B warrants, the warrants are classified as liabilities under the caption
“Warrant liability” in the accompanying balance sheets and recorded at estimated fair value at issuance with any subsequent
change in fair value of the outstanding warrants since issuance reflected in “Change in fair value of warrant liability”
in the accompanying statements of operations. Additionally, any share settlement of the Warrant liability upon a warrant exercise
is reflected as a noncash settlement of the pro-rata share of the Warrant liability and issuance of common stock.
We used the Monte Carlo
simulation valuation method to estimate the fair value of the outstanding Series A and Series B warrants. The Monte Carlo simulation
valuation method utilizes the quoted market price of the Company’s common stock, expected volatility of the Company’s
stock, no dividend yield, an expected life based on the remaining contractual term of the outstanding warrants and a risk-free
interest rate. The risk-free interest rate is based on USD overnight indexed swaps with a maturity equivalent to the warrants’
expected life.
Stock-Based Compensation
We had one stock-based
compensation plan at September 30, 2017, the 2011 Equity Incentive Plan. Accounting for stock-based compensation generally requires
the recognition of the cost of employee services for stock-based compensation based on the grant date fair value of the equity
or liability instruments issued. We use the Black-Scholes option pricing model to estimate the fair value of our stock options.
Expected volatility is determined using historical volatilities based on historical stock prices for a period equal to the expected
term. The expected volatility assumption is adjusted if future volatility is expected to vary from historical experience. The expected
term of options represents the period of time that options granted are expected to be outstanding and falls between the options'
vesting and contractual expiration dates. The Company’s historical stock option exercise experience does not provide a reasonable
basis upon which to estimate expected term. As such, the simplified method was used to calculate the expected term. The risk-free
interest rate is based on the yield at the date of grant of a zero-coupon U.S. Treasury bond whose maturity period equals the option's
expected term.
Income Taxes
Our losses from inception
to date have resulted principally from costs incurred in conducting clinical trials and in research and development activities
related to efforts to develop our products and from the associated administrative costs required to support those efforts. We have
recorded a deferred tax asset for our NOLs; however, as the Company has incurred losses since inception, and since there is no
certainty of future profits, a valuation allowance has been provided in full on our deferred tax assets in the accompanying consolidated
financial statements. Additionally, during 2013, the Company completed an analysis of its section 382 limit. Based on this analysis,
the Company concluded that the amount of NOL carryforwards and the credits available to offset taxable income is limited under
section 382. Accordingly, if the Company generates taxable income in any year in excess of its then annual limitation, the Company
may be required to pay federal income taxes even though it has unexpired NOL carryforwards. Additionally, because U.S. tax laws
limit the time during which NOLs and tax credit carryforwards may be applied against future taxable income and tax liabilities,
the Company may not be able to take full advantage of its NOLs and tax credit carryforwards for federal income tax purposes. Future
public and private stock placements may create additional limitations on the Company’s NOLs, credits and other tax attributes.
Changes in Accounting Policies
In
November 2016, the FASB issued ASU No. 2016-18,
“Statement of Cash Flows (Topic
230): Restricted Cash”. The new standard requires restricted cash to be included with cash and cash equivalents when reconciling
the beginning and ending amounts on the statement of cash flows, and requires additional disclosures in the notes to the financial
statements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal
years and early adoption is permitted. The Company adopted this standard during the quarter ended March 31, 2017. See Note 2 to
the financial statements included herein.
In March 2016, the
FASB issued ASU 2016-09, Compensation—Stock Compensation (ASC Topic 718): Improvements to Employee Share-Based Payment
Accounting. The new standard simplifies the accounting for stock-based compensation, including amendments on how both taxes related
to stock-based compensation and cash payments made to taxing authorities are recorded. ASU 2016-09 is effective for annual reporting
periods beginning on or after December 15, 2016, and interim periods within those annual periods and early application is permitted,
with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company adopted ASU 2016-09 effective January
1, 2017. The adoption of this standard did not have a material effect on the Company’s financial statements.
In November 2015,
the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”),
which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet.
The ASU simplifies the current guidance in ASC Topic 740, Income Taxes, which requires entities to separately present deferred
tax assets and liabilities as current and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning
after December 15, 2016, and interim periods within those annual periods. The Company adopted ASU 2015-07 effective January
1, 2017. The adoption of this standard did not have a material effect on the Company’s financial statements.
New Accounting Pronouncements Not Yet
Adopted
In July 2017,
the FASB issued ASU No. 2017-11, “(Part I) Accounting or Certain Financial Instruments with Down Round Features”
(“ASU 2017-11”), which changes the classification analysis of certain equity-linked financial instruments with down
round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature will no longer preclude equity classification when assessing whether the instrument is indexed to an entity’s
own stock. ASU 2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In February 2016, FASB
issued ASU 2016-02, Leases (ASC Topic 842), which supersedes ASC Topic 840, Leases. The new standard is intended to increase transparency
and comparability of organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. The new guidance is effective for financial statements issued for annual reporting periods beginning
after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact of this standard on
its consolidated financial statements.
In May 2014, the FASB
issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU
2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods
or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services.
In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this
guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from
contracts with customers. On July 9, 2015, the FASB voted to delay the effective date of this standard by one year. This deferral
resulted in ASU 2014-09 being effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. Entities have the option of
using either a full retrospective or a modified retrospective approach to adopt the guidance. The Company is currently assessing
the effects this guidance may have on its consolidated financial statements, as well as the method of transition that the Company
will use in adopting the new standard.
Results of Operations
Comparison
of the three and nine month periods ended September 30, 2017 and 2016
Revenues and Other
Income
Total revenues and
other income increased to $304,000 for the three month period ended September 30, 2017 as compared to $10,000 for the
same period in the prior year. Total revenues and other income increased to $158,000 for the nine month period ended September
30, 2017 as compared to $41,000 for the same period in the prior year. The increase in revenues and other income in both periods
is primarily due the change in the fair value of the warrants issued by the Company in May 2017 during the three and nine month
periods ended September 30, 2017. Excluding the change in the fair value of the warrants, revenues and other income decreased
in both periods primarily due to lower cash balances during the three and nine month periods ended September 30, 2017,
as compared to the comparable periods in the prior year.
Research and Development
Expenses
R&D expenses include
contracted services relating to our clinical product development activities which include preclinical studies, clinical trials,
expenses associated with our patent portfolio, regulatory affairs, including FDA filing fees, and bulk manufacturing scale-up activities
and bulk active ingredient purchases for preclinical and clinical trials primarily relating to our two products in clinical development,
which are Proellex® and enclomiphene. Research and development expenses also include internal operating expenses relating to
our general research and development activities. R&D expenses decreased 69%, or $2.2 million, to $1.0 million for the three
month period ended September 30, 2017, as compared to $3.2 million for the same period in the prior year. Our primary
R&D expenses for the three month periods ended September 30, 2017 and 2016 are shown in the following table (in thousands):
|
|
Three months ended
September 30
,
|
|
|
|
|
|
|
|
Research and Development
|
|
2017
|
|
|
2016
|
|
|
Variance
|
|
|
Change (%)
|
|
Proellex® clinical development
|
|
$
|
85
|
|
|
$
|
769
|
|
|
$
|
(684
|
)
|
|
|
(89
|
)%
|
Enclomiphene clinical development
|
|
|
201
|
|
|
|
992
|
|
|
|
(791
|
)
|
|
|
(80
|
)%
|
Payroll and benefits
|
|
|
188
|
|
|
|
663
|
|
|
|
(475
|
)
|
|
|
(72
|
)%
|
Operating and occupancy
|
|
|
505
|
|
|
|
758
|
|
|
|
(253
|
)
|
|
|
(33
|
)%
|
Total
|
|
$
|
979
|
|
|
$
|
3,182
|
|
|
$
|
(2,203
|
)
|
|
|
(69
|
)%
|
The clinical development
expenses related to Proellex® decreased for the three month period ended September 30, 2017, as compared to the prior
year period, due to decreased expenses associated with of our completed Phase 2b clinical trials for the treatment of uterine fibroids
and endometriosis. The clinical development expenses related to enclomiphene decreased for the three month period ended September 30, 2017,
as compared to the prior year period, due to decreased expenses associated with our completed Phase 2 proof of concept study, ZA-205.
Payroll and benefits
expenses decreased 72%, or approximately $475,000, to $188,000 for the three month period ended September 30, 2017, as
compared to $663,000 for the same period in the prior year. Salaries for the three month period ended September 30, 2017
were $140,000 as compared to $414,000 for the same period in the prior year. Also during the three month period ended September
30, 2017, the Company incurred $33,000 in severance expense related to a reduction in its workforce. As a result of the Company’s
reduction in workforce during 2017, non-cash stock-based compensation decreased $170,000 for the three month period ended September
30, 2017, as compared to the same period in the prior year.
Operating and occupancy
expenses decreased 33%, or approximately $253,000, to $505,000 for the three month period ended September 30, 2017 as
compared to $758,000 for the same period in the prior year, primarily due to decreased legal expenses.
R&D expenses decreased
59%, or approximately $6.0 million, to $4.2 million for the nine month period ended September 30, 2017, as compared to $10.2 million
for the same period in the prior year. Our primary R&D expenses for the nine month periods ended September 30, 2017 and 2016
are shown in the following table (in thousands):
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
Research and Development
|
|
2017
|
|
|
2016
|
|
|
Variance
|
|
|
Change (%)
|
|
Proellex® clinical development
|
|
$
|
733
|
|
|
$
|
2,915
|
|
|
$
|
(2,182
|
)
|
|
|
(75
|
)%
|
Enclomiphene clinical development
|
|
|
742
|
|
|
|
3,173
|
|
|
|
(2,431
|
)
|
|
|
(77
|
)%
|
Payroll and benefits
|
|
|
1,395
|
|
|
|
2,085
|
|
|
|
(690
|
)
|
|
|
(33
|
)%
|
Operating and occupancy
|
|
|
1,322
|
|
|
|
2,018
|
|
|
|
(696
|
)
|
|
|
(34
|
)%
|
Total
|
|
$
|
4,192
|
|
|
$
|
10,191
|
|
|
$
|
(5,999
|
)
|
|
|
(59
|
)%
|
For the nine month
period ended September 30, 2017, as compared to the same period in 2016, R&D expenses related to the clinical development of
Proellex® decreased 75%, or approximately $2.2 million, primarily due to decreased expenses associated with our completed Phase
2b clinical trials for the treatment of uterine fibroids and endometriosis. R&D expenses related to the clinical development
of enclomiphene decreased 77%, or approximately $2.4 million, due to decreased expenses associated with our completed Phase 2 proof
of concept study, ZA-205.
Payroll and benefits
expenses decreased 33%, or approximately $690,000, to $1.4 million for the nine month period ended September 30, 2017, as compared
to $2.1 million for the same period in the prior year. Salaries for the nine month period ended September 30, 2017 were $905,000,
as compared to $1.3 million for the same period in the prior year. Included in payroll and benefits expense is a charge for non-cash
stock-based compensation of $85,000 for the nine month period ended September 30, 2017, as compared to a charge of $527,000 for
the same period in the prior year. Also during the nine month period ended September 30, 2017, the Company incurred $203,000 in
severance expense related to a reduction in its workforce.
Operating and occupancy
expenses decreased 34%, or approximately $696,000, to $1.3 million for the nine month period ended September 30, 2017, as compared
to $2.0 million for the same period in the prior year, primarily due to decreased legal expenses and other outside services.
Through September 30, 2017
we have incurred approximately $72.1 million for the development of Proellex® and approximately $74.3 million for the development
of enclomiphene. These accumulated costs exclude any internal operating expenses and expenses associated with the patent portfolio.
General and Administrative
Expenses
General and administrative
(“G&A”) expenses decreased 6%, or approximately $57,000, to $940,000 for the three month period ended September 30, 2017
as compared to $997,000 for the same period in the prior year. Our primary G&A expenses for the three month periods ended September 30, 2017
and 2016 are shown in the following table (in thousands):
|
|
Three months ended
September 30,
|
|
|
|
|
|
|
|
General and Administrative
|
|
2017
|
|
|
2016
|
|
|
Variance
|
|
|
Change (%)
|
|
Payroll and benefits
|
|
$
|
385
|
|
|
$
|
587
|
|
|
$
|
(202
|
)
|
|
|
(34
|
)%
|
Operating and occupancy
|
|
|
555
|
|
|
|
410
|
|
|
|
145
|
|
|
|
35
|
%
|
Total
|
|
$
|
940
|
|
|
$
|
997
|
|
|
$
|
(57
|
)
|
|
|
(6
|
)%
|
G&A payroll and
benefits expenses include salaries, bonuses, non-cash stock-based compensation expense, fringe benefits, recruiting fees and severance
pay. Included in payroll and benefits expense is a charge for non-cash stock-based compensation of $130,000 for the three month
period ended September 30, 2017 as compared to a charge of $296,000 for the same period in the prior year. Additionally,
salaries for the three month period ended September 30, 2017 were $229,000 as compared to $257,000 for the same period in the prior
year.
G&A operating and
occupancy expenses, which include expenses to operate as a public company, increased 35%, or approximately $145,000, to $555,000
for the three month period ended September 30, 2017 as compared to $410,000 for the same period in the prior year primarily
due to an increase in professional fees.
G&A expenses increased
81%, or approximately $2.5 million, to $5.7 million for the nine month period ended September 30, 2017, as compared to $3.1 million
for the same period in the prior year. Our primary G&A expenses for the nine month periods ended September 30, 2017 and 2016
are shown in the following table (in thousands):
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
General and Administrative
|
|
2017
|
|
|
2016
|
|
|
Variance
|
|
|
Change (%)
|
|
Payroll and benefits
|
|
$
|
4,248
|
|
|
$
|
1,843
|
|
|
$
|
2,405
|
|
|
|
130
|
%
|
Operating and occupancy
|
|
|
1,441
|
|
|
|
1,301
|
|
|
|
140
|
|
|
|
11
|
%
|
Total
|
|
$
|
5,689
|
|
|
$
|
3,144
|
|
|
$
|
2,545
|
|
|
|
81
|
%
|
G&A payroll and
benefits expenses include salaries, bonuses, non-cash stock-based compensation expense, severance pay, recruiting fees and fringe
benefits. Included in payroll and benefits expense is a charge for non-cash stock-based compensation of $595,000 for the nine month
period ended September 30, 2017, as compared to a charge of $963,000 for the same period in the prior year. Additionally, salaries
for the nine month period ended September 30, 2017 were $698,000, as compared to $771,000 for the same period in the prior year.
Also included in payroll and benefits for the nine month period ended September 30, 2017, was a charge of $2.8 million related
to the departure of Mr. Podolski.
G&A operating and
occupancy expenses, which include expenses to operate as a public company, increased approximately $140,000 to $1.4 million for
the nine month period ended September 30, 2017, as compared to $1.3 million for the same period in the prior year primarily due
to an increase in consulting fees and other outside services.
Change in Fair Value
of Warrant Liability
As a result of the
May Public Offering (described in Note 6 to the financial statements included herein), the Company issued Series A, Series B and
Series C warrants that include a net cash settlement feature at the option of the warrant holder in certain limited circumstances
in which the Company fails to timely deliver registered common shares upon a warrant exercise. Through September 30, 2017, 2,397,834
Series B warrants and all Series C warrants have been exercised. The outstanding Series A and Series B warrants are classified
as liabilities under the caption “Warrant liability” in the accompanying balance sheets and recorded at estimated fair
value at issuance with any subsequent change in fair value of the outstanding warrants since issuance reflected in “Change
in fair value of warrant liability” in the accompanying statements of operations. For a detailed discussion on the change
in fair value of warrant liability, see Note 7 to the financial statements included herein.
Off-Balance Sheet Arrangements
As of September 30, 2017,
we did not have any off-balance sheet arrangements.
Liquidity and Capital Resources
Since our inception,
we have financed our operations primarily with proceeds from private placements and public offerings of equity securities and with
funds received under collaborative agreements.
On August 9,
2016, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Ladenburg
Thalmann & Co. Inc. (“Ladenburg”), pursuant to which we had the ability to issue and sell from time to time
through Ladenburg, as sales agent and/or principal, shares of our common stock having an aggregate offering price of up to
$10 million (the “ATM Shares”). Ladenburg had no obligation to sell on our behalf any specific number or
dollar amount of the ATM Shares, but Ladenburg, upon acceptance of written instructions from us, agreed to use its
commercially reasonable efforts consistent with its customary trading and sales practices, to sell the ATM Shares up to the
amount specified, and otherwise in accordance with the terms of a placement notice delivered to Ladenburg. Ladenburg
was entitled to receive a commission of 3% of the gross sales price of all ATM Shares sold through it under the Equity
Distribution Agreement. Effective May 9, 2017, the Company terminated the Sales Agreement and the related ATM Program. During
the nine month period ended September 30, 2017, we sold 849,157 ATM Shares at a weighted average share price of $1.20 for
proceeds of approximately $1,021,000, net of expenses including approximately $32,000 in commissions to Ladenburg.
On May 23, 2017, the
Company sold 2,744,125 shares of common stock and pre-funded Series C Warrants to purchase up to 2,245,875 shares of common stock
in an underwritten public offering to certain investors (the “May Public Offering”). Each share of common stock was
sold at a price of $0.60 and each Series C Warrant was issued with an exercise price of $0.60 per share of common stock, $0.60
of which was pre-funded at closing and $0.001 was payable upon exercise. This May Public Offering also included the issuance of
Series A Warrants to purchase 3,742,500 shares of our common stock at an initial exercise price of $0.84 per share and Series B
Warrants to purchase 2,495,000 shares of our common stock at an initial exercise price of $0.92 per share. Each share of common
stock and each pre-funded Series C Warrant to purchase a share of common stock were sold together with a Series A Warrant to purchase
0.75 share of common stock and a Series B Warrant to purchase 0.50 share of common stock. The net proceeds to the Company from
the sale of common stock and warrants, after deducting underwriting discounts and commissions and other offering expenses, were
approximately $2.5 million.
Our primary use of
cash to date has been in operating activities to fund research and development, including preclinical studies and clinical trials,
and general and administrative expenses. We had cash and cash equivalents of approximately $1.8 million as of September 30, 2017
as compared to $8.7 million as of December 31, 2016. All cash and cash equivalents as of September 30, 2017 and December 31, 2016
were held in an account backed by U.S. government securities.
Net cash of approximately
$8.5 million and $12.5 million was used in operating activities during the nine month periods ended September 30, 2017 and 2016,
respectively. The major use of cash for operating activities for the nine month period ended September 30, 2017 was to fund our
clinical development programs and associated administrative costs. No cash was used in investing activities during the nine month
periods ended September 30, 2017 and 2016. Cash provided by financing activities for the nine month period ended September 30,
2017 was approximately $3.5 million primarily from sale of 2,744,125 shares of common stock and pre-funded Series C Warrants to
purchase up to 2,245,875 shares of common stock in the May Public Offering at an offering price of $0.50 per share, net of related
underwriting discounts and commissions and other offering costs and the sale of 849,157 ATM Shares at a weighted average share
price of $1.20, net of related offering costs.
We have experienced
negative cash flows from operations since inception. We will require substantial funds for R&D, including preclinical studies
and clinical trials of our product candidates, and to commence sales and marketing efforts, if appropriate, if the FDA or other
regulatory approvals are obtained. We anticipate that our current liquidity will be sufficient to continue the development of our
product candidates (to the extent
we deem appropriate) and meet our obligations as they become due through the end of 2017. We continue to explore potential additional
financing alternatives, including corporate partnering opportunities, that would provide sufficient funds to enable us to continue
to develop our two product candidates through FDA approval; however, there can be no assurance that we will be successful in raising
any such additional funds on a timely basis or at all. Our capital requirements will depend on many factors, which are discussed
in detail in “Item 1A., Risk Factors” of Form 10-K for the fiscal year ended December 31, 2016. The uncertainties relating
to the foregoing matters raise substantial doubt about our ability to continue as a going concern.
Our results of operations
may vary significantly from quarter to quarter and year to year, and depend on, among other factors, our ability to raise additional
capital on acceptable terms or at all, our ability to be successful in our clinical trials, the regulatory approval process in
the United States and other foreign jurisdictions and the ability to complete strategic licenses and product development agreements.
The timing of our revenues may not match the timing of our associated product development expenses. To date, R&D expenses have
usually exceeded revenue in any particular period and/or fiscal year.