You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes included in this Quarterly Report on Form 10-Q. The following discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results and the timing of certain events could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those discussed below and elsewhere in this Quarterly Report.
This discussion should be read in conjunction with the accompanying unaudited
consolidated financial statements and the audited consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for
the year ended
OVERVIEW
We are a biopharmaceutical company primarily engaged in the development of
immune therapies and vaccines. Our allogeneic vaccine platform is based on
secreted gp96 and designed to activate the immune system. This platform has
broad applications in cancer and infectious disease. Our platform leverages a
natural molecular warning system that presents antigens to the immune system.
HS-110 (viagenpumatucel-L) is our first allogeneic ("off-the-shelf") cell line
biologic product candidate in a series of proprietary immunotherapies designed
to stimulate a patient's T cells to fight cancer. HS-130 is another allogeneic
cell line engineered to express the extracellular domain of OX40 ligand as a
fusion protein (OX40L-Fc). This biologic is a key costimulator of T cells, with
potential to augment antigen-specific CD4+ and CD8+ T cell responses. We have
initiated development of a new COVID-19 vaccine program under our
These programs are designed to harness innate and/or antigen specific immune activation and tolerance mechanisms to reprogram immunity and provide a long-term, durable clinical effect. We have completed the following clinical milestones, completed patient enrollment for our HS-110 Phase 2 non-small cell lung cancer (NSCLC) clinical trial, completed enrollment and dosed fifteen patients in our HS-130 Phase 1 clinical trial and dosed fifteen patients in our PTX-35 Phase 1a clinical trial.
We are also providing pre-clinical, CMC development, and administrative support for these programs; while constantly focusing on protecting and expanding our intellectual property in areas of strategic interest. As we advance our clinical programs, we are in close contact with our CROs and clinical sites to monitor the impact of COVID-19 on our studies, current timelines, and costs.
In an effort to decrease our dependence upon third party manufacturers and
enhance efficiency, we are designing and building a cGMP facility in
We are also expanding our infectious disease/biothreat programs and have formed
a biothreat advisory board to aid in advancing our biothreat initiatives. In
addition, our
23 Table of Contents Our Clinical Programs
We completed patient enrollment in our HS-110 Phase 2 non-small cell lung cancer (NSCLC) clinical trial and completed enrollment of patients in our HS-130 Phase 1 clinical trial that combines HS-110 with HS-130 to drive immune surveillance. Our PTX-35 safety and dose escalation Phase 1 clinical trial also continues to enroll patients. We are also providing pre-clinical, CMC development, and administrative support for these efforts; while constantly focusing on protecting and expanding our intellectual property in areas of strategic interest. We currently do not have any FDA approved products or sales and we have not generated any significant revenue since our inception nor revenue from product sales. We expect to continue to incur significant expenses and increased operating losses over the next several years. We anticipate that our expenses will increase substantially in the following areas:
? ongoing clinical trials of our product candidates;
? maintaining, expanding, and protecting our intellectual property portfolio;
? gaining regulatory approvals for our product pipeline;
? continued research and development efforts;
? the building and operation of our facility for the development of bioanalytics,
process development and manufacturing activities;
increased operational, financial, management information systems, and personnel
? - including personnel to support our product development and commercialization
efforts; and
? expenses incurred with operating as a public company.
About our gp96 Platform
Our gp96 platform is designed to activate and expand tumor antigen specific "killer" T cells to destroy a patient's cancer. By turning immunologically "COLD tumors HOT," we believe our platform can become an essential component of the immuno-oncology regimen to enhance the effectiveness and durability of checkpoint inhibitors and other cancer therapies, thereby improving outcomes for those patients less likely to benefit from checkpoint inhibitors alone.
We believe this is a highly differentiated approach as our platform delivers a broad range of tumor antigens that are previously unrecognized by the patient's immune system. Tumor antigens are processed and chaperoned by a powerful and naturally occurring immune adjuvant, gp96, to activate an anti-cancer immune response. Our cancer vaccine therapeutics are replication incompetent, "off-the-shelf", allogenic cell-based therapies that are locally administered into the skin. The treatment primes innate immune recognition and activates T cells to seek and destroy the cancer cells throughout the body. These gp96 agents can be administered with a variety of immuno-modulators to enhance a patient's immune response through T cell activation.
Unlike many other "patient specific" or autologous immunotherapy approaches, our drug biotherapeutics are fully allogeneic, "off-the-shelf" products. This provides a means to quickly administer the biotherapeutic without the need to extract and expand blood or tumor tissue from individual patients or create individualized treatment based on the patient's haplotype. Our gp96 product candidates are produced from allogeneic cell lines expressing tumor-specific proteins common among cancers. Because each patient receives the same treatment, we believe that our immunotherapy approach offers superior speed to initiation, logistics, manufacturing efficiencies, and importantly, cost benefits, compared to "personalized" precision medicine approaches.
Our gp96 platform also delivers antigen-driven T cell activation and specific co-stimulation in a single product. The vaccine delivers both the gp96 heat shock protein and a T cell co-stimulatory fusion protein (OX40L) as a single therapeutic, without the need for multiple, independent biologic products. This dual approach has several potential advantages including: (a) enhanced activation of antigen-specific CD8+ T cells; (b) boosting the number of antigen-specific CD8+ and CD4+ T cells compared to OX40L alone; (c) stimulation of T cell memory function to remain effective after treatment, even in the event of cancer remission; (d) demonstration of less toxicity, as the source of cancer associated antigens and co-stimulator are supplied at the same time locally in the draining lymph nodes, which drives targeted, cancer specific immunity towards the tumor rather than throughout the body; and (e) simplification of combination cancer immunotherapy versus systemic co-stimulation with conventional monoclonal antibodies (mAbs).
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An Allogenic Cell-Based Approach to Activating the Immune System
Our gp96 platform is an allogenic cell-based, T cell-stimulating platform that functions as an immune activator to stimulate and expand T effector cells. The key component of this innovative immunotherapy platform is the dual functionality of the gp96 heat shock protein.
As a molecular chaperone, gp96 is typically found within the cell's endoplasmic reticulum and facilitates the folding of newly synthesized proteins for functionalized tasks. When a cell abnormally dies through necrosis or infection, gp96 is naturally released into the surrounding microenvironment. This event becomes a Danger Associated Molecular Protein, or "DAMP", a molecular warning signal for localized innate activation of the immune system. In this context, gp96 serves as a potent adjuvant, or immune stimulator, via Toll-Like Receptor 4/2 (TLR4 and TLR2) signaling which serves to activate professional antigen presenting cells (APCs), such as dendritic cells that upregulate T cell costimulatory ligands, major histocompatibility (MHC) molecules and immune activating cytokines. It is among the most powerful adjuvants found in the body and uniquely shows exclusive specificity to CD8+ "killer" T cells through cross-presentation of the gp96-chaperoned tumor associated peptide antigens directly to MHC class I molecules for direct activation and expansion of CD8+ T cells. Thus, gp96 plays a central role driving mechanism of action for our T cell activating platform immuno-therapies; mimicking necrotic cell death and activating a powerful, tumor antigen-specific T cell immune response to attack the patient's cancer cells.
About COVID-19 Program
Besides its utility in oncology, our gp96 platform has been shown to activate
the human immune system to combat infectious diseases. Our collaborators have
laid a solid foundation by engineering different pathogenic antigens into our
platform. Previous preclinical studies using our gp96 platform includes SIV/HIV,
Malaria and Zika. We initiated a COVID-19 vaccine program in collaboration with
the
During the first quarter of 2020, preclinical studies using a cell-based
COVID-19 vaccine expressing gp96-Ig, OX40L-Ig, and the SARS-CoV-2 spike
glycoprotein (ZVX-60) were started under a sponsored research agreement with the
The strategy for this program includes providing prophylactic protection to elderly patients and those with underlying health conditions to drive cellular immune responses via CD8+ T cells, in addition to humoral B cell immune responses. We currently plan to seek grant funding for further development of this program however to date we have not received any grant funding.
About PTX-35
Pelican is focused on developing an agonist PTX-35 mAb, against a T cell costimulatory receptor, TNFRSF25. PTX-35 is designed to harness antigen specific immune activation and tolerance mechanisms to reprogram immunity and provide a long-term, durable clinical effect. TNFRSF25 agonism has been shown to provide highly selective and potent stimulation of antigen experienced 'memory' CD8+ cytotoxic T cells, which are the class of long-lived T cells capable of eliminating tumor cells in patients. Due to the preferential specificity of PTX-35 to antigen experienced CD8+ T cells, this agent represents a promising candidate as a T cell co-stimulator biotherapeutic in cancer patients.
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When combined in preclinical studies with Heat Biologics HS-110 and HS-130 immunotherapies or anti-PD-1 checkpoint inhibitor, PTX-35 has been shown to enhance antigen specific T cell activation to eliminate tumor cells. Pelican is also developing other immune biologics that target TNFRSF25 modulators for various immunotherapy approaches.
Our Bioanalytics,
To promote efficiency and reduce our reliance on third-party CDMO vendors, we
are building in-house bioanalytic, process development, and manufacturing
capabilities to support our current biotherapeutics and discovery pipeline.
Manufacturing will also be offered to third parties as a fee-for-service model.
We have entered into a lease for a 20,441 square foot facility in
Equipment purchases of
approximately
Recent Developments
On
On
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as "critical" because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates-which also would have been reasonable-could have been used, which would have resulted in different financial results.
Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with
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Table of Contents
The notes to our consolidated financial statements contained herein and to our audited consolidated financial statements contained in our 2020 Annual Report contain a summary of our significant accounting policies. We consider the following accounting policies critical to the understanding of the results of our operations:
? Revenue; ? In-process R&D; ?Goodwill impairment; ? Income tax;
? Contingent consideration;
? Stock-based compensation;
? Research and development costs, including clinical and regulatory costs; and
? Recent accounting pronouncements.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended
Revenues. For the three months ended
Research and development expense. Research and development expenses increased
approximately 37.5% to
For the Three Months Ended September 30, 2021 2020 Programs HS-110$ 0.2 $ 0.1 HS-130 0.3 0.2 PTX-35 1.1 0.5 COVID-19 0.7 0.1 Other programs - 0.1 Unallocated research and development expenses 2.1 2.2$ 4.4 $ 3.2
HS-110 expense was
? development activities, primarily due to increased costs associated with our
Phase 2 trial.
? HS-130 expense was
investigator site payments for the ongoing Phase 1 clinical trial.
PTX-35 expense increased
? third-party regulatory consulting and investigator site payments for the
ongoing Phase 1 clinical trial.
? COVID-19 program was
agreement costs and manufacturing costs.
? Other programs include preclinical costs associated with our Zika program, T
cell costimulatory programs, and laboratory supplies.
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? Unallocated research expenses primarily reflects personnel costs, including
stock-based compensation from stock awards.
General and administrative expense. General and administrative expense was
Change in fair value of contingent consideration. The change in fair value of
contingent consideration was
Total non-operating income (loss). Total non-operating income was
Net loss attributable to
Comparison of the Nine Months Ended
Revenues. For the nine months ended
Research and development expense. Research and development expenses increased
approximately 36.4% to
For the Nine Months Ended September 30, 2021 2020 Programs HS-110 $ 1.4$ 0.5 HS-130 0.6 0.6 PTX 35 2.2 1.6 COVID-19 1.6 0.2 Other programs 0.2 0.2 Unallocated research and development expenses 6.0 5.7 $ 12.0$ 8.8
HS-110 expense increased
? development activities, primarily due to increased costs associated with the
transition of patients from active treatment into long-term follow-up, and
increased manufacturing costs.
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HS-130 expense remained steady at
? enrollment of patients, third-party regulatory consulting and investigator site
payments for the ongoing Phase 1 clinical trial.
? PTX-35 expense was
development and patient dosing.
? COVID-19 program was
agreement costs and manufacturing costs.
? Other programs include preclinical costs associated with our Zika program, T
cell costimulatory programs, and laboratory supplies.
? Unallocated research expenses primarily reflects personnel costs, including
stock-based compensation from stock awards.
General and administrative expense. General and administrative expense was
Change in fair value of contingent consideration. The change in fair value of
contingent consideration was
Total non-operating income (loss). Other income was
Net loss attributable to
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Since our inception in
We expect to incur significant expenses and continued losses from operations for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development and advance our clinical trials of, and seek marketing approval for, our product candidates and as we add to our product candidate pipeline including expansion of our infectious disease/biothreat programs. Our expenses will also increase due
29 Table of Contents
to our recent new lease obligations for the manufacturing facility in
Cash Flows
Operating activities. The use of cash during the nine months ended
Investing activities. Net cash used in investing activities was
Financing activities. Net cash provided by financing activities was
Current and Future Financing Needs
We have incurred an accumulated deficit of
In order to promote efficiency and reduce our reliance on third-party vendors,
we plan to enhance our in-house development of bioanalytic, process development
and manufacturing capabilities and offer such services to third parties for
fees. We have entered into a lease for a 20,441 square foot facility in
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are currently building the facility. Our proposed expansion in
We intend to meet our financing needs through multiple alternatives, including, but not limited to, cash on hand, additional equity financings, debt financings and/or funding from partnerships or collaborations and potential revenue, if any, from our planned development and manufacturing facility.
However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:
? the progress of our research activities;
? the number and scope of our research programs;
? the progress of our preclinical and clinical development activities;
? the progress of the development efforts of parties with whom we have entered
into research and development agreements;
? our expansion plans and cash needs of any new projects such as our planned
development and manufacturing facility described above;
the cost we incur to build the facility for the development of bioanalytics,
? process development and manufacturing activities, the cost of the equipment
required for such facility and the revenue derived from such facility
? our ability to maintain current research and development licensing arrangements
and to establish new research and development and licensing arrangements;
? our ability to achieve our milestones under licensing arrangements;
? the costs involved in prosecuting and enforcing patent claims and other
intellectual property rights;
? the costs and timing of regulatory approvals;
? the receipt of grant funding if any; and
? clinical laboratory development and testing.
We have based our estimate on assumptions that may prove to be wrong. We may
need to obtain additional funds sooner or in greater amounts than we currently
anticipate. Potential sources of financing include strategic relationships,
public or private sales of our equity or debt and other sources. We may seek to
access the public or private equity markets when conditions are favorable due to
our long-term capital requirements. We do not have any committed sources of
financing at this time, and it is uncertain whether additional funding will be
available when we need it on terms that will be acceptable to us, or at all. If
we raise funds by selling additional shares of common stock, such as through the
Amended and Restated Common Stock Sales Agreement with
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OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under
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