Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the
future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant
risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements
as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors”
and incorporated by reference herein. See also the “Special Cautionary Notice Regarding Forward-Looking Statements”
set forth at the beginning of this report.
You
should read the following discussion and analysis in conjunction with the unaudited financial statements, and the related footnotes
thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited
financial statements included in our annual report on Form 10-K for the fiscal year ended October 31, 2019. In addition, we intend
to use our media and investor relations website (www.advaxis.com/investor-relations), SEC filings, press releases, public conference
calls and webcasts to communicate with the public about Advaxis, its services and other issues.
Overview
Advaxis,
Inc. (“we” or “Advaxis”) is a clinical-stage biotechnology company focused on the development and commercialization
of proprietary Listeria monocytogenes (“Lm”)-based antigen delivery products. We are using our Lm
platform directed against tumor-specific targets in order to engage the patient’s immune system to destroy tumor cells.
Through a license from the University of Pennsylvania, we have exclusive access to this proprietary formulation of attenuated
Lm called Lm TechnologyTM. Our proprietary approach is designed to deploy a unique mechanism of action
that redirects the immune system to attack cancer in three distinct ways:
|
●
|
Alerting
and training the immune system by activating multiple pathways in Antigen-Presenting Cells (“APCs”) with the equivalent
of multiple adjuvants;
|
|
|
|
|
●
|
Attacking the tumor
by generating a strong, cancer-specific T cell response; and
|
|
|
|
|
●
|
Breaking down tumor
protection through suppression of the protective cells in the tumor microenvironment (“TME”) that shields the
tumor from the immune system. This enables the activated T cells to begin working to attack the tumor cells.
|
Our
proprietary Lm platform technology has demonstrated clinical activity in several of our programs and has been dosed in
over 470 patients across multiple clinical trials and in various tumor types. We believe that Lm Technology immunotherapies
can complement and address significant unmet needs in the current oncology treatment landscape. Specifically, our product candidates
have the potential to work synergistically with other immunotherapies, including checkpoint inhibitors, while having a generally
well-tolerated safety profile.
Recent
Developments
On
March 11, 2020, the World Health Organization declared the coronavirus (COVID-19) a pandemic, and on March 13, 2020, the United
States declared a national emergency with respect to COVID-19. The pandemic has resulted in government-imposed quarantines, travel
restrictions, business and school closures and other public health safety measures. We are monitoring the COVID-19 pandemic and
taking steps intended to mitigate the potential risks to our workforce and our operations. The evolving COVID-19 pandemic has,
and may continue to, directly or indirectly affect the pace of enrollment in our clinical trials as patients may avoid or may
not be able to travel to healthcare facilities and physicians’ offices unless due to a health emergency and clinical trial
staff can no longer get to the clinic. Nonetheless, thus far, the COVID-19 pandemic has not had a significant impact on the business.
However, we remain be in contact with the clinical sites in our study and we are in discussion with additional sites in order
to combat any potential impact in enrollment. We are unable to determine or predict the extent, duration or scope of the overall
impact of the COVID-19 pandemic on our business, operations, financial condition or liquidity.
Strategic
Transactions
As
a matter of course, we are reviewing strategic transactions and alternatives and there can be no assurance that we will be successful
in identifying or completing any strategic transactions, that any such strategic transaction will result in additional value for
our stockholders or that the process will not have an adverse impact on our business. These transactions could include, but are
not limited to, collaboration agreements, co-development agreements, strategic mergers, reverse mergers, the issuance or buyback
of public shares, or the purchase or sale of specific assets, in addition to other potential actions aimed at increasing stockholder
value. There can be no assurance that the review of strategic transactions will result in the identification or consummation of
any transaction. Our Board of Directors may also determine that our most effective strategy is to continue to effectuate our current
business plan. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including,
but not limited to, market conditions, industry trends, the interest of third parties in our business and the availability of
financing to potential buyers on reasonable terms. No decision has been made with respect to any transaction.
The
Advaxis Corporate Strategy
Our
strategy is to advance the Lm Technology platform and leverage its unique capabilities to design and develop an array of
cancer treatments. We are currently conducting or have conducted clinical studies of Lm Technology immunotherapies in HPV-associated
cancers (including cervical and head and neck), prostate cancer, non-small cell lung cancer and other solid tumor types. We are
working with, or are in the process of identifying, collaborators for our programs.
Moving
forward, we expect that we will continue to invest in our core clinical program areas and will also remain opportunistic in evaluating
Investigator Sponsored Trials (“ISTs”) as well as licensing opportunities. The Lm Technology platform is protected
by a range of patents, covering both product and process, some of which we believe can be maintained into 2040.
Advaxis
Pipeline of Product Candidates
Disease
focused hotspot/ ‘off the shelf’ neoantigen therapies (ADXS-HOT)
We
are creating a new group of immunotherapy constructs for major solid tumor cancers that combines our optimized Lm Technology
vector with promising targets designed to generate potent anti-cancer immunity. The ADXS-HOT program is a series of novel cancer
immunotherapies that will target somatic mutations, or hotspots, cancer testis antigens, or CTAs, and oncofetal antigens, or OFAs.
These three types of targets form the basis of the ADXS-HOT program because they are designed to be more capable of generating
potent, tumor specific, and high strength killer T cells, versus more traditional over-expressed native sequence tumor associated
antigens. Most hotspot mutations and OFA/CTA proteins play critical roles in oncogenesis; targeting both at once could significantly
impair cancer proliferation. The ADXS-HOT products will combine many of the potential high avidity targets that are expressed
in all patients with the target disease into one “off-the-shelf,” ready to administer treatment. We believe the ADXS-HOT
technology has a strong intellectual property, or IP, position, with potential protection into 2040, and an IP filing strategy
providing for broad coverage opportunities across multiple disease platforms and combination therapies.
In
July 2018, we announced that the U.S. Food and Drug Administration, or FDA, allowed our investigational new drug, or IND, application
for our ADXS-HOT drug candidate (ADXS-503) for non-small cell lung cancer, or NSCLC. The Phase 1/2 clinical trial of ADXS-503
is seeking to establish the recommended dose, safety, tolerability and clinical activity of ADXS-503 administered alone and in
combination with a KEYTRUDA® in approximately 50 patients with NSCLC, in at least five sites across the U.S. The two dose
levels with monotherapy in Part A, (1x108 and 5x108 CFU) have been completed and Part B with ADXS-503 (1x108
CFU) in combination with KEYTRUDA® is currently closed to enrollment. Based on the results reported to date, including
an observed stable disease and a partial response in the first two patients in Part B who previously progressed on KEYTRUDA®,
we are planning to expand Part B to additional patients at dose level 1 (1x108 CFU + KEYTRUDA®) with the potential
to proceed to dose level 2 (5x108 CFU + KEYTRUDA®) at a later date. In addition, we intend to expand the study
to Part C, which will evaluate ADXS-503 in combination with KEYTRUDA® (1x108 CFU + KEYTRUDA®) as a first line
treatment for patients that are medically unfit to receive the standard of care regimen with KEYTRUDA® in combination with
chemotherapy.
Additionally,
in January 2020, we announced that the FDA has allowed our IND for the initiation for a Phase 1 clinical study of ADXS-504, our
ADXS-HOT drug candidate for prostate cancer.
Prostate
Cancer (ADXS-PSA)
According
to the American Cancer Society, prostate cancer is the second most common type of cancer found in American men and is the second
leading cause of cancer death in men, behind only lung cancer. More than 191,000 men are estimated to be diagnosed with prostate
cancer in 2020, with approximately 33,000 deaths each year. Unfortunately, in about 10-20% of cases, men with prostate cancer
will go on to develop castration-resistant prostate cancer, or CRPC, which refers to prostate cancer that progresses despite androgen
deprivation therapy. Metastatic CRPC, or mCRPC, occurs when the cancer spreads to other parts of the body and there is a rising
prostate-specific antigen, PSA, level. This stage of prostate cancer has an average survival of 9-13 months, is associated with
deterioration in quality of life, and has few therapeutic options available.
We
have entered into a clinical trial collaboration and supply agreement with Merck & Co., or Merck, to evaluate the safety and
efficacy of ADXS-PSA as monotherapy and in combination with KEYTRUDA®, Merck’s anti PD-1 antibody, in a Phase
1/2, open-label, multicenter, dose determination and expansion trial in patients with previously treated metastatic, castration-resistant
prostate cancer (KEYNOTE-046). ADXS-PSA was tested alone or in combination with KEYTRUDA in an advanced and heavily pretreated
patient population who had progressed on androgen deprivation therapy. A total of 13 and 37 patients were evaluated on monotherapy
and combination therapy, respectively. For the ADXS-PSA monotherapy dose escalation and determination portion of the trial, cohorts
were started at a dose of 1 x 109 cfu (n=7) and successfully escalated to higher dose levels of 5x109 cfu
(n=3) and 1x1010 cfu (n=3) without achieving a maximum tolerated dose. Treatment-related adverse events, or TRAEs,
noted at these higher dose levels were generally consistent with those observed at the lower dose level (1 x 109 cfu)
other than a higher occurrence rate of Grade 2/3 hypotension. The Recommended Phase II Dose of ADXS-PSA monotherapy was determined
to be 1x 109 cfu based on a review of the totality of the clinical data. This dose was used in combination with 200mg
of pembrolizumab in a cohort of six patients to evaluate the safety of the combination before moving into an expanded cohort of
patients. The safety of the combination was confirmed and enrollment in the expansion cohort phase was initiated. Enrollment in
the study was completed in January 2017.
Data
regarding checkpoint inhibitor monotherapy (KEYNOTE-199) has shown some antitumor activity that provides disease control in a
subset of patients with bone-predominant mCRPC previously treated with next generation hormonal agents and docetaxel. Data from
the KEYNOTE-199 trial in bone-predominant mCRPC patients treated with KEYTRUDA®, or pembrolizumab, was presented at the ASCO
GU meeting in 2019. In this trial, the total stable disease/disease stabilization rate was 39% with no responses reported so far,
and only one patient with ≥50% decrease in the post-baseline PSA value. It is hypothesized that the limited activity in mCRPC
may be due to 1) the inability of the checkpoint inhibitor to infiltrate the tumor microenvironment and 2) the presence of an
immunosuppressive tumor micro-environment, or TME. The combination therapy with agents—like Lm constructs—that
induce T cell infiltration within the tumor and decrease negative regulators in the TME may improve performance of checkpoints
in prostate cancer.
For
KEYNOTE-046, as of the final data cutoff, September 16, 2019, the median overall survival (mOS) for 37 patients in the combination
arm was 33.7 months (95% CI, range 15.4-33.7 months) and the median overall survival (95% CI) of 16.4 months (4.0-NR) for patients
with prior visceral metastasis (n=11; 10 pts with prior docetaxel). This updated median overall survival is an increase from the
previous data presented at the American Association for Cancer Research Annual Meeting in April 2019, where median overall survival
was 21.1 months in the combination arm. The majority of TRAEs consisted of transient and reversible Grade 1-2 chills/rigors, fever,
hypotension, nausea and fatigue. The combination of ADXS-PSA and KEYTRUDA® has appeared to be well-tolerated to date, with
no additive toxicity observed. We are in discussions with potential partners regarding opportunities to expand or advance this
mCRPC program.
HPV-Related
Cancers
We
conducted several studies evaluating axalimogene filolisbac, or AXAL, for HPV-related cancers. Axalimogene filolisbac (AXAL) is
an Lm-based antigen delivery product directed against HPV and designed to target cells expressing HPV.
In
June 2019, we announced the closing of our AIM2CERV Phase 3 clinical trial with AXAL in high-risk locally advanced cervical cancer.
The decision to close the study was based on the estimated remaining cost to complete the AIM2CERV trial of $80 million to $90
million, in addition to the timing to complete the study. The initial efficacy data was not anticipated for at least three years.
No results from the clinical trial were to be available for at least three more years and therefore, results of the study were
not the basis for the decision to close the study, nor was safety as the trial recently underwent its third Independent Data Monitoring
Committee (IDMC) review with no safety issues noted. We are in the process of winding down the study and plan to publish the results
in a medical journal in the future. We have no plans to further fund studies using AXAL.
In
2014, Advaxis granted Global BioPharma, or GBP, an exclusive license for the development and commercialization of AXAL in Asia,
Africa, and the former Soviet Union territory, exclusive of India and certain other countries. GBP is responsible for all development
and commercial costs and activities associated with the development in their territories. GBP anticipates initiating its Phase
2, open-label controlled trial in HPV-associated NSCLC in patients following first-line chemotherapy by the end of 2019. The study
will be assessing the effects of AXAL when combined with pemetrexed in patients with HPV+ NSCLC, following first line induction
therapy.
Personalized
Neoantigen-directed Therapies (ADXS-NEO)
ADXS-NEO
is an individualized Lm Technology antigen delivery product developed using whole-exome sequencing of a patient’s
tumor to identify neoantigens. ADXS-NEO is designed to work by presenting a large payload of neoantigens directly into dendritic
cells within the patient’s immune system and stimulating a T cell response against cancerous cells. In October 2019, we
announced that we dosed our last patient in Part A, in monotherapy, and we do not intend to continue into Part B, in combination
with a checkpoint inhibitor. As a result, we are in the process of winding down this study and we intend to publish the final
results from Part A of the ADXS-NEO study in a medical journal in the future.
Other
Lm Technology Products
HER2
Expressing Solid Tumors
HER2
is overexpressed in a percentage of solid tumors including osteosarcoma. According to published literature, up to 60% of osteosarcomas
are HER2 positive, and this overexpression is associated with poor outcomes for patients. ADXS-HER2 is an Lm Technology
antigen delivery product candidate designed to target HER2 expressing solid tumors including human and canine osteosarcoma. ADXS-HER2
has received FDA and EMA orphan drug designation for osteosarcoma and has received Fast Track designation from the FDA for patients
with newly-diagnosed, non-metastatic, surgically-resectable osteosarcoma.
In
September 2018, we announced that we had granted a license to OS Therapies, LLC, or OS Therapies, for the use of ADXS31-164, also
known as ADXS-HER2, for evaluation in the treatment of osteosarcoma in humans. Under the terms of the license agreement, OS Therapies
will be responsible for the conduct and funding of a clinical study evaluating ADXS-HER2 in recurrent, completely resected osteosarcoma.
Pursuant to the agreement, upon OS Therapies’ successful completion of a financing, Advaxis expects to receive an upfront
payment, reimbursement for product supply and other support, clinical, regulatory, and sales-based milestone payments, and royalties
on future product sales. Additional details of the financial terms have not been disclosed.
Canine
Osteosarcoma
On
March 19, 2014, we entered into a definitive Exclusive License Agreement, or Aratana Agreement, with Aratana Therapeutics, Inc.,
or Aratana, where we granted Aratana an exclusive, worldwide, royalty-bearing license, with the right to sublicense, certain of
our proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for
treatment of osteosarcoma and other cancer indications in animals. A product license request was filed by Aratana for ADXS-HER2
(also known as AT-014 by Aratana) for the treatment of canine osteosarcoma with the United States Department of Agriculture, or
USDA. Aratana received communication in December 2017 that the USDA granted Aratana conditional licensure for AT-014 for the treatment
of dogs diagnosed with osteosarcoma, one year of age or older.
Under
the terms of the Aratana Agreement, Aratana paid an upfront payment to Advaxis in the amount of $1,000,000 upon signing of the
Aratana Agreement. Aratana will also pay Advaxis: (a) up to $36.5 million based on the achievement of milestone relating to the
advancement of products through the approval process with the USDA in the United States and the relevant regulatory authorities
in the European Union, or E.U., in all four therapeutic areas and up to an additional $15 million in cumulative sales milestones
based on achievement of gross sales revenue targets for sales of any and all products for use in non-human animal health applications,
or the Aratana Field, (regardless of therapeutic area), and (b) tiered royalties starting at 5% and going up to 10%, which will
be paid based on net sales of any and all products (regardless of therapeutic area) in the Aratana Field in the United States.
Royalties for sales of products outside of the United States will be paid at a rate equal to half of the royalty rate payable
by Aratana on net sales of products in the United States (starting at 2.5% and going up to 5%). Royalties will be payable on a
product-by-product and country-by-country basis from first commercial sale of a product in a country until the later of (a) the
10th anniversary of first commercial sale of such product by Aratana, its affiliates or sub licensees in such country or (b) the
expiration of the last-to-expire valid claim of our patents or joint patents claiming or covering the composition of matter, formulation
or method of use of such product in such country. Aratana will also pay us 50% of all sublicense royalties received by Aratana
and its affiliates. In fiscal year 2019, we received approximately $8,000 in royalty revenue from Aratana. Additionally, in July
2019, Aratana announced that their shareholders approved a merger agreement with Elanco Animal Health, or Elanco, whereby Elanco
is now the majority shareholder of Aratana. All of the terms of the Aratana Agreement remain in effect.
Results
of Operations for the Three Months Ended April 30, 2020 and 2019
Revenue
Revenue
decreased approximately $0.9 million to $0.3 million for the three months ended April 30, 2020 compared to $1.2 million for the
three months ended April 30, 2019. The decrease was due to the termination of the collaboration agreement with Amgen effective
February 8, 2019. Revenue associated with the performance related to the upfront fees received was approximately $0.3 million
for the three months ended April 30, 2019. In addition, during the three months ended April 30, 2019, the reimbursement of research
and development costs by Amgen of approximately $0.9 million was included in revenue. During the three months ended April 30,
2020, we received the annual licensing fee from GBP.
Research
and Development Expenses
We
invest in research and development to advance our Lm technology through our pre-clinical and clinical development programs.
Research and development expenses for the three months ended April 30, 2020 and April 30, 2019 were categorized as follows (in
thousands):
|
|
Three Months Ended
April 30,
|
|
|
Increase
(Decrease)
|
|
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotspot/Off-the-Shelf therapies
|
|
$
|
909
|
|
|
$
|
960
|
|
|
$
|
(51
|
)
|
|
|
(5
|
)%
|
Prostate cancer
|
|
|
156
|
|
|
|
(214
|
)
|
|
|
370
|
|
|
|
(173
|
)
|
HPV-associated cancers
|
|
|
789
|
|
|
|
1,950
|
|
|
|
(1,161
|
)
|
|
|
(60
|
)
|
Personalized neoantigen-directed therapies
|
|
|
558
|
|
|
|
103
|
|
|
|
455
|
|
|
|
442
|
|
Other expenses
|
|
|
1,510
|
|
|
|
3,170
|
|
|
|
(1,660
|
)
|
|
|
(52
|
)
|
Total research & development expense
|
|
$
|
3,922
|
|
|
$
|
5,969
|
|
|
$
|
(2,047
|
)
|
|
|
(34
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in research and development expense
|
|
$
|
62
|
|
|
$
|
258
|
|
|
$
|
(196
|
)
|
|
|
(76
|
)%
|
Hotspot/Off-the-Shelf
Therapies (ADXS-HOT)
Research
and development costs associated with our hotspot mutation-based therapies for the three months ended April 30, 2020 decreased
approximately $0.1 million to $0.9 million compared to the same period in 2019. The decrease is attributable to the startup costs
associated with the initiation of the Phase 1/2 clinical trial during the prior period. We have completed enrollment in Part A,
in monotherapy, and Part B, in combination with pembrolizumab at five sites across the U.S. In February 2020, and further updated
in May 2020, we announced the initial clinical data from the study which showed that ADXS-503 has been safe and tolerable with
potential signs of clinical activity in four out of the seven evaluable patients achieving stable disease in the refractory setting.
In addition, the first two patients evaluated in Part B who previously progressed on pembrolizumab showed stable disease with
a 25% reduction in a site lesion in the first patient and a sustained partial response observed in the second patient. We anticipate
reporting additional information from this study as it becomes available throughout 2020.
Prostate
Cancer Therapy (ADXS-PSA)
Research
and development costs associated with our prostate cancer therapy for the three months ended April 30, 2020 increased approximately
$0.4 million, or 173%, compared to the same period in 2019. The increase is attributable to the receipt of credit memorandums
from the contract research organization during the prior period. The Phase 1/2 study of our ADXS-PSA compound is in combination
with KEYTRUDA® (pembrolizumab), Merck’s humanized monoclonal antibody. During 2020, we presented updated data from this
study which demonstrated an increase in the median overall survival, or mOS, to 33.7 months for patients in the combination arm
of this study and mOS of 16.4 for patients with visceral metasteses (n=11). We are in discussions with potential partners on next
steps for this therapy.
HPV-Associated
Cancers
The
majority of the HPV-associated research and development costs include clinical trial and other related costs associated with our
AXAL programs in cervical and head and neck cancers. HPV-associated costs for the three months ended April 30, 2020 decreased
approximately $1.2 million, or 60%, compared to the same period in 2019. The decrease resulted from the announcement made in June
2019 regarding the closing of our Phase 3 AIM2CERV study in high-risk locally advanced cervical cancer. We anticipate that we
will continue to incur costs associated with the wind down of the study until late 2020. Additionally, a winding down of several
studies, including our Fawcett study in anal cancer and our MEDI4736 study in combination with MedImmune’s investigational
anti-PD-L1 immune checkpoint inhibitor, durvalumab, drove further reduction in costs as compared to the prior period. We anticipate
that our costs surrounding HPV-associated studies will continue to decline as we wrap up the remaining clinical and regulatory
obligations of the program. We currently do not anticipate funding any new AXAL studies.
Personalized
Neoantigen-Directed Therapies
Research
and development costs associated with personalized neoantigen-directed therapies for the three months ended April 30, 2020 increased
approximately $0.5 million, or 442%, compared to the same period in 2019. The increase is attributable to changes in estimates
made by our contract research organization, which reduced the expense in the prior period. In October 2019, we announced that
we have enrolled our last patient in the ADXS-NEO program in monotherapy and will not continue into Part B of this study. As a
result, the costs incurred for ADXS-NEO during the three months ended April 30, 2020 consisted of wind down costs associated with
terminating the study. We anticipate that we will incur wind down costs for this study until late 2020 and plan to publish the
results of this program in a future medical journal.
Other
Expenses
Other
expenses include salary and benefit costs, stock-based compensation expense, professional fees, laboratory costs and other internal
and external costs associated with our research & development activities. Other expenses for the three months ended April
30, 2020 decreased approximately $1.7 million, or 52%, compared to the same period in 2019. The decrease was primarily attributable
to a decrease in salary related expenses, including stock compensation, and travel expenses resulting from cost control measures
put in place beginning in June 2018. In addition, there were decreases in laboratory and manufacturing costs, as we are focused
on the clinical development of our HOT program and less on early research programs. Additionally, we announced in October 2019
that we are winding down ADXS-NEO and therefore no longer incurring costs to manufacture ADXS-NEO.
General
and Administrative Expenses
General
and administrative expenses primarily include salary and benefit costs and stock-based compensation expense for employees included
in our finance, legal and administrative organizations, outside legal and professional services, and facilities costs. General
and administrative expenses for the three months ended April 30, 2020 and April 30, 2019 were as follows (in thousands):
|
|
Three Months Ended
April 30,
|
|
|
Increase
(Decrease)
|
|
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
2,649
|
|
|
$
|
3,092
|
|
|
$
|
(443
|
)
|
|
|
(14
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in general and administrative expense
|
|
$
|
148
|
|
|
$
|
221
|
|
|
$
|
(73
|
)
|
|
|
(33
|
)%
|
General
and administrative expenses for the three months ended April 30, 2020 decreased approximately $443 million, or 14%, compared to
the same period in 2019. The decrease is attributable to lower legal fees, employee bonus accruals and business development costs.
Loss
on shares issued in settlement of warrants
On
March 14, 2019, we entered into private exchange agreements with certain holders of warrants issued in connection with our September
2018 public offering of common stock and warrants. Pursuant to such exchange agreements, we issued 856,865 shares of common stock
to the investors in exchange for such warrants on a 1:1 basis. In connection with the warrant exchange, we recorded a loss of
approximately $1.6 million for the three months ended April 30, 2019.
Results
of Operations for the Six Months Ended April 30, 2020 and 2019
Revenue
Revenue
decreased approximately $20.6 million to $0.3 million for the six months ended April 30, 2020 compared to $20.9 million for the
six months ended April 30, 2019. The decrease was due to a change in the estimated performance period associated with upfront
fees received from Amgen in conjunction with the collaboration agreement signed in August 2016. On December 10, 2018, we received
a written notice of termination from Amgen with respect to the Amgen Agreement. The termination was effective as of February 8,
2019. As of the notification date, we adjusted revenue on a cumulative catch-up basis considering the revised measure of progress
for the combined performance obligation based on the modified service period up to and through the contract termination date of
February 8, 2019 resulting in total revenue of $18.7 million in the prior period. In addition, the reimbursement of research and
development costs of approximately $2.0 million by Amgen was included in revenue in the prior period.
Research
and Development Expenses
We
invest in research and development to advance our Lm technology through our pre-clinical and clinical development programs.
Research and development expenses for the six months ended April 30, 2020 and April 30, 2019 were categorized as follows (in thousands):
|
|
Six months ended
April 30,
|
|
|
Increase
(Decrease)
|
|
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotspot/Off-the-Shelf therapies
|
|
$
|
1,462
|
|
|
|
1,677
|
|
|
$
|
(215
|
)
|
|
|
(13
|
)%
|
Prostate cancer
|
|
|
534
|
|
|
|
364
|
|
|
|
170
|
|
|
|
47
|
|
HPV-associated cancers
|
|
|
2,524
|
|
|
|
3,161
|
|
|
|
(637
|
)
|
|
|
(20
|
)
|
Personalized neoantigen-directed therapies
|
|
|
908
|
|
|
|
1,309
|
|
|
|
(401
|
)
|
|
|
(31
|
)
|
Other expenses
|
|
|
3,353
|
|
|
|
6,164
|
|
|
|
(2,811
|
)
|
|
|
(46
|
)
|
Total research & development expense
|
|
$
|
8,781
|
|
|
|
12,675
|
|
|
$
|
(3,894
|
)
|
|
|
(31
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in research and development expense
|
|
$
|
153
|
|
|
|
581
|
|
|
$
|
(428
|
)
|
|
|
(74
|
)%
|
Hotspot/Off-the-Shelf
Therapies (ADXS-HOT)
Research
and development costs associated with our hotspot mutation-based therapies for the six months ended April 30, 2020 decreased approximately
$0.2 million to $1.5 million compared to the same period in 2019. The decrease is attributable to the startup costs associated
with the initiation of the Phase 1/2 clinical trial in the prior period.
Prostate
Cancer Therapy (ADXS-PSA)
Research
and development costs associated with our prostate cancer therapy for the six months ended April 30, 2020 increased approximately
$0.2 million, or 47%, compared to the same period in 2019. The increase is attributable to the receipt of credit memorandums from
the contract research organization during the prior period.
HPV-Associated
Cancers
The
majority of the HPV-associated research and development costs include clinical trial and other related costs associated with our
AXA, programs in cervical and head and neck cancers. HPV-associated costs for the six months ended April 30, 2020 decreased approximately
$0.6 million, or 20%, compared to the same period in 2019. The decrease resulted from the announcement made in June 2019 regarding
the closing of our Phase 3 AIM2CERV study in high-risk locally advanced cervical cancer.
Personalized
Neoantigen-Directed Therapies
Research
and development costs associated with personalized neoantigen-directed therapies for the six months ended April 30, 2020 decreased
approximately $0.4 million, or 31%, compared to the same period in 2019. In October 2019, we announced that we have enrolled our
last patient in the ADXS-NEO program in monotherapy and will not continue into Part B of this study. As a result, the costs incurred
for ADXS-NEO during the six months ended April 30, 2020 consisted of wind down costs associated with terminating the study. We
anticipate that we will incur wind down costs for this study until late 2020 and plan to publish the results of this program in
a future medical journal.
Other
Expenses
Other
expenses include salary and benefit costs, stock-based compensation expense, professional fees, laboratory costs and other internal
and external costs associated with our research & development activities. Other expenses for the six months ended April 30,
2020 decreased approximately $2.8 million, or 46%, compared to the same period in 2019. The decrease was primarily attributable
to a decrease in salary related expenses, including stock compensation, and travel expenses resulting from cost control measures
put in place beginning in June 2018. In addition, there were decreases in laboratory and manufacturing costs, as we are focused
on the clinical development of our HOT program and less on early research programs. Additionally, we announced in October 2019
that we are winding down ADXS-NEO and therefore no longer incurring costs to manufacture ADXS-NEO.
General
and Administrative Expenses
General
and administrative expenses primarily include salary and benefit costs and stock-based compensation expense for employees included
in our finance, legal and administrative organizations, outside legal and professional services, and facilities costs. General
and administrative expenses for the six months ended April 30, 2020 and April 30, 2019 were as follows (in thousands):
|
|
Six months ended
April 30,
|
|
|
Increase
(Decrease)
|
|
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
5,679
|
|
|
$
|
5,759
|
|
|
$
|
(80
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in general and administrative expense
|
|
$
|
299
|
|
|
$
|
520
|
|
|
$
|
(221
|
)
|
|
|
(43
|
)%
|
General
and administrative expenses for the six months ended April 30, 2020 decreased approximately $0.1 million, or 1%, compared to the
same period in 2019. General and administrative expenses for the six months ended April 30, 2020 were consistent with general
and administrative expenses for the six months ended April 30, 2019.
Changes
in Fair Values
For
the six months ended April 30, 2020, we recorded non-cash expense from changes in the fair value of the warrant liability of approximately
$23,000. The increase in the fair value of liability warrants resulted from an increase in our share price from $0.32 at October
31, 2019 to $0.67 at April 30, 2020.
For
the six months ended April 30, 2019, we recorded non-cash income from changes in the fair value of the warrant liability of approximately
$2.4 million. The decrease in the fair value of liability warrants resulted from a decrease in our share price from $8.42 at October
31, 2018 to $3.54 at April 30, 2019.
Loss
on shares issued in settlement of warrants
On
March 14, 2019, we entered into private exchange agreements with certain holders of warrants issued in connection with our September
2018 public offering of common stock and warrants. Pursuant to such exchange agreements, we issued 856,865 shares of common stock
to the investors in exchange for such warrants on a 1:1 basis. In connection with the warrant exchange, we recorded a loss of
approximately $1.6 million for the six months ended April 30, 2019.
Liquidity
and Capital Resources
Going
Concern and Managements Plans
Similar
to other development stage biotechnology companies, our products that are being developed have not generated significant revenue.
As a result, we have suffered recurring losses and we require significant cash resources to execute our business plans. These
losses are expected to continue for an extended period of time. Historically, our major sources of cash have comprised proceeds
from various public and private offerings of our common stock, debt financings, clinical collaborations, option and warrant exercises,
NOL tax sales, income earned on investments and grants, and interest income. From October 2013 through April 30, 2020, we raised
approximately $302.7 million in gross proceeds ($10.5 million in fiscal year 2020) from various public and private offerings of
our common stock.
We
have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the indefinite
future. As of April 30, 2020 and October 31, 2019, we had an accumulated deficit of approximately $398.4 million and $384.3 million,
respectively, and stockholders’ equity of approximately $35.4 million and $39.5 million, respectively.
The
COVID-19 pandemic has negatively affected the global economy and created significant volatility and disruption of financial markets.
An extended period of economic disruption could negatively affect our business, financial condition, and access to sources of
liquidity. As of April 30, 2020, we had approximately $28.2 million in cash and cash equivalents. The actual amount of cash that
we will need to continue operating is subject to many factors. We have based this estimate on assumptions that may prove to be
wrong, and we could use available capital resources sooner than currently expected. We reduced our operating expenses to $38.9
million for the fiscal year ended October 31, 2019 as compared to $76.4 million for the fiscal year ended October 31, 2018. Furthermore,
we expect operating expenses to be approximately $25.1 million for fiscal year 2020, which includes approximately $6.0 million
in non-recurring costs related to programs that are winding down. Based on this, we expect to have sufficient capital to fund
our obligations as they become due in the ordinary course of business until at least August 2021. In addition, we expect to adjust
spending accordingly based on the budgeted cash flow requirements developed and the excess cash on hand.
On
May 8, 2020, the Company entered into a sales agreement related to an at-the-market equity offering program pursuant to which
the Company may sell, from time to time, common stock with an aggregate offering price of up to $40 million through A.G.P./Alliance
Global Partners, as sales agent, for general corporate purposes.
Cash
Flows
Operating
Activities
Net
cash used in operating activities was approximately $13.4 million for the six months ended April 30, 2020 compared to $19.8 million
for the six months ended April 30, 2019. Net cash used in operating activities includes reduced spending associated with our clinical
trial programs and general and administrative activities. In the third quarter of fiscal 2018, we began instituting measures to
control costs for non-essential items in areas that didn’t support our strategic direction, and as a result, we have continued
to reduce operating expenditures significantly.
Investing
Activities
Net
cash used in investing activities was approximately $0.4 million for the six months ended April 30, 2020 compared to $0.7 million
for the six months ended April 30, 2019. The reduction is a result of the abandonment of certain non-strategic intellectual property.
Financing
Activities
Net
cash provided by financing activities was approximately $9.6 million for the six months ended April 30, 2020 as compared to $9.1
million for the six months ended April 30, 2019. We completed a public offering of 10,000,000 shares of our common stock in January
2020, which resulted in net proceeds of approximately $9.7 million, while in fiscal 2019, we received net proceeds of approximately
$9.0 million from the sales of 2,500,000 shares of our common stock in a public offering in April 2019.
Off-Balance
Sheet Arrangements
As
of April 30, 2020, our total future minimum lease payments under noncancelable operating leases was approximately $7.7 million.
Critical
Accounting Estimates
The
preparation of financial statements in accordance with accounting principles generally accepted in the United States of America.
requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial
statements. Management considers an accounting estimate to be critical if:
|
●
|
it
requires assumptions to be made that were uncertain at the time the estimate was made, and
|
|
|
|
|
●
|
changes
in the estimate of difference estimates that could have been selected could have material impact in our results of operations
or financial condition.
|
While
we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the
circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates
impact the following transactions or account balances: stock compensation, warrant liability valuation and impairment of intangibles.
See
Note 2 to our condensed financial statements that discusses significant accounting policies.
New
Accounting Standards
See
Note 2 to our condensed financial statements that discusses new accounting pronouncements.