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This management's discussion and analysis ("MD&A") of the financial condition
and results of operations of the Company should be read in conjunction with our
unaudited condensed consolidated financial statements and accompanying notes for
the three and nine months ended September 30, 2017 and 2016, which have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP"). All dollar amounts are in U.S. dollars ("US$" or "$")
unless stated otherwise.
Our MD&A is intended to enable readers to gain an understanding of our current
operating results and financial position. To do so, we provide information and
analysis comparing the results of operations and financial position for the
current period to those of the preceding comparable period. We also provide
analysis and commentary that we believe is required to assess our future
prospects. Accordingly, certain sections of this report contain forward-looking
statements that are based on current plans and expectations. These
forward-looking statements are affected by risks and uncertainties that are
discussed in Item 1A of our registration statement on Form 10 filed on September
29, 2017, and below in the section titled "Special Note Regarding
Forward-Looking Statements" and that could have a material impact on future
prospects. Readers are cautioned that actual results could vary from those
forecasted in this MD&A.
Special Note Regarding Forward-Looking Statements
In this document we make a number of statements, referred to as "forward-looking
statements," that are intended to convey our expectations or predictions
regarding our product development and commercialization goals and expectations,
our plans and anticipated timing and results of clinical development activities,
potential market opportunities, revenue expectations and the potential
advantages and applications of our products and product candidates under
development, include forward-looking statements that involve risks and
uncertainties.
These forward-looking statements are derived, in part, from various assumptions
and analyses we have made in the context of our current business plan and
information currently available to us and in light of our experience and
perceptions of historical trends, current conditions and expected future
developments and other factors we believe to be appropriate in the
circumstances.
You can generally identify forward-looking statements through words and phrases
such as "WILL," "SEEK," "ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," "INTEND,"
"PLAN," "BUDGET," "PROJECT," "MAY BE," "MAY CONTINUE," "MAY LIKELY RESULT," and
similar expressions. When reading any forward looking-statement, you should
remain mindful that all forward-looking statements are inherently uncertain as
they are based on current expectations and assumptions concerning future events
or future performance of our company, and that our actual results or
developments may vary substantially from those expected as expressed in or
implied by that statement for a number of reasons or factors, including those
relating to:
expectations for the clinical and pre-clinical development, manufacturing,
regulatory approval, and commercialization of our pharmaceutical product
candidate or any other products we may acquire or in-license?
expectations for increases or decreases in expenses?
our use of clinical research organizations and other contractors?
whether or not markets for our products develop and, if they do develop, the
pace at which they develop;
expectations for generating revenue or becoming profitable on a sustained basis?
expectations or ability to enter into marketing and other partnership
agreements?
our ability to attract and retain the qualified personnel to implement our
growth strategies;
our ability to obtain approval from the Food and Drug Administration ("FDA") for
our products;
acceptance of our products by doctors, patients or payors?
availability of reimbursement for our products?
our ability to obtain and then protect the patents on our proprietary
technology;
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our ability to fund our short-term and long-term operating needs;
estimates of the sufficiency of our existing cash and cash equivalents and
investments to finance our operating requirements, including expectations
regarding the value and liquidity of our investments?
changes in our business plan and corporate strategies; and
other risks and uncertainties discussed in greater detail in the sections of
this document, including those captioned "Risk Factors" and "Financial
Information."
Any of the assumptions underlying forward-looking statements could be
inaccurate. You are cautioned not to place undue reliance on any forward-looking
statements included in this Form 10Q. All forward-looking statements are made as
of the date of this Form 10Q and the risk that the actual results will differ
materially from the expectations expressed in this Form 10Q will increase with
the passage of time. Except as otherwise required by the federal securities
laws, we undertake no obligation to publicly update or revise any
forward-looking statements after the date of this Form10Q, whether as a result
of new information, future events, changed circumstances or any other reason. In
the light of significant uncertainties inherent in the forward-looking
statements included in this Form 10Q, the inclusion of such forward-looking
statements should not be regarded as a representation by us or any other person
that the objectives and plans set forth in this Form 10Q will be achieved.
1. Executive Summary
Background and History of the Company. AngioGenex, Inc., and our wholly owned
subsidiary AngioGenex Therapeutics, Inc. ("AngioGenex", "we", "us", "our", or
the "Company") is a public bio-pharmaceutical company dedicated to the
development and commercialization of a novel, inexpensive treatment for vascular
diseases including many forms of cancer and macular degeneration.
The Science - Discovering the Target. Since their discovery more than twenty
years ago, Dr. Robert Benezra, the Company Chief Scientific and Executive
Officer and a Member at Memorial Sloan Kettering Cancer Center ("MSKCC"), has
been pursuing the role of the "Id" genes, and the proteins they express, in
stimulating intrinsic tumor cell growth and blood vessel development to support
that growth that occurs both in early fetal development, and the pathology of
numerous important diseases. Subsequent experiments by Dr. Benezra with an "Id
knock-out" mouse suggested that interfering with Id protein activity might
prevent the establishment and spread of tumors that normally "dupe" the body
into activating the Id mechanism for cancer cell proliferation and to create the
new blood vessels cancer cells need to grow and spread. The role of the Id
proteins as targets for neovessels and tumor cell proliferation, as well as
metastasis, was further discussed in numerous scientific articles. The articles
also discuss the Id mechanism and potential for disease prevention.
The Company's bio-pharmaceutical technology and its development plans are based
on the hypothesis that Id protein-supported cell proliferation and
neo-vascularization is central to the pathology of many forms of cancer and
macular degeneration (a disease characterized by unregulated blood vessel growth
in the eye), and that the inhibition of Id has a powerful positive effect on
preventing the progression of many forms of cancer and macular degeneration.
The Company - Business Strategy. AngioGenex was created to capture the full
potential of the Id platform. We currently own unencumbered exclusive worldwide
rights under issued and pending patents to a novel class of drugs that target
the Id proteins. Central to this strategy is our symbiotic relationship with
MSKCC, which includes a coordinated research and development ("R&D) program and
clinical trial plan. MSKCC holds common stock in the Company that was granted in
return for the efforts it contributed to Dr. Benezra's early efforts in
discovering the role of the Id proteins and their potential as targets for
disease intervention.
Product Development - Designing and Testing Novel Drugs. With the Company
confident that the cell biology suggesting the importance of the target was
established (as suggested in the following publications: "Angiogenesis
impairment in Id-deficient mice cooperates with an Hsp90 inhibitor to completely
suppress HER2 neu-dependent breast tumors" (Candia et al, Proceedings of The
National Academy of Sciences 2003) and "The Id proteins and Angiogenesis"
(Benezra, Rafii, Lyden, Oncogene 2001), the next step was to try to hit that
target with a drug that would inhibit Id, and prevent the process of tumor cell
proliferation and new blood vessel formation, thereby impeding the spread of
cancer cells. Attempting to do so required the creation of a company to complete
the medicinal chemistry and preclinical development. Commercializing the concept
required raising seed capital, organizing a team with the expertise to identify
the target's molecular structure, conducting high through-put
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screening and rational drug design modeling, securing the intellectual property
protecting its findings and conducting the pre-clinical experiments with the
most active "hits." The Company was created for that purpose, and focused on
developing this platform technology into the first Id-inhibitor drug. AngioGenex
has accomplished key benchmarks since its inception by incubating the
technology, and concretizing the concept in the form of active proprietary
chemical compounds, small molecules such as our two lead drug candidates that,
based on unpublished data, the Company believes to have shown specific activity
in various animal models of various cancers and macular degeneration.
Our two lead drug candidates are AGX51 and its derivative AGX51-?, with AGX51-?
being the first drug candidate we are testing towards an Investigational New
Drug Application ("IND"). The Company also has a number of other proprietary
small molecules. Focusing on the exact three-dimensional atomic structure of the
Id protein, our chemists designed drugs that we believe bind to the Id proteins
and inhibit their activity, based on unpublished experimental data regarding the
drugs' activity in in vitro tests, and from animal models of breast cancer and
macular degeneration. The goal of these experiments was to see if, in
pre-clinical models, AGX51-? and AGX51's other derivatives can reproduce the
impact of Id gene deletion in preventing the Id proteins from performing their
role in support of the establishment and spread of cancer. The Company's working
hypothesis is that the Company's drugs interfere with Id activity both in the
tumor cells themselves and the vessels that support their growth, and that this
dual activity might support the Company's attempts to establish the superior
performance of AGX51-? over other drugs which only inhibit blood vessel growth.
Competition. We believe that there is no other company developing an Id-based
therapeutic, diagnostic or prognostic product. However, there are a large number
of competitors developing cancer therapeutics based on an anti-angiogenic
approach. There are also a significant number of companies developing
therapeutics and diagnostics based on other technologies.
The leading drugs in the field of anti-angiogenic drug therapy are Genentech's
Avastin for cancer (approximately $6.6 billion in sales in 2013) and Regeneron's
Eylea for macular degeneration (whose sales have lifted the company's market cap
to over $40 billion). Both target a different molecule (Vascular Endothelial
Growth Factor) that is active in normal adult biology (side effects) with
anti-bodies or "biologics."
Corporate Strategy - Pre-Clinical and Clinical Development. The Company's drugs
(including our two lead drug candidates AGX51 and its derivative AGX51-?) are at
the pre-clinical stage of development. Our Company would like to ultimately
develop different Id-inhibitor drugs to treat cancer and macular degeneration.
As a corporate strategy, the cancer program (i.e. AGX51) is on hold pending the
receipt of sufficient resources or partnerships and we have determined to move
first with the macular degeneration program (i.e. AGX51-?).
For AGX51, the estimated timeframe and cost for completion of pre-clinical work
is approximately 15 to 18 months and approximately $1.5 million to $2 million so
that we can file an IND and the estimated cost to complete Phase I/IIA clinical
trials is approximately $12 million. For AGX51-?, the estimated timeframe and
cost for completion of pre-clinical work is approximately 15 to 18 months and
approximately $1.9 million so that we can file an IND and the estimated cost to
complete Phase I/IIA clinical trials is approximately $8 million to $12 million.
We estimate that we are only able to fund our current operations through June
2018 and will need to raise at least $1.2 million in capital to fund our
pre-clinical development plan and related operational expenses.
To elaborate, our team is poised to take one of our two lead compounds AGX51-?
through this pre-clinical testing in 15-18 months and then into the clinic for
testing in age related macular degeneration ("ARMD"). We elected to pursue the
ARMD indication first, rather than any form of cancer, because of the relatively
lower cost of doing so and our belief, based on the work we have done on AGX51
at the Wilmer Eye Institute, that there is greater predictability in relation to
the pre-clinical animal model data for the ARMD indication. Our current plan is
to complete pre-clinical work for the filing of an IND in the ocular indication
initially and conduct a Phase I/IIA clinical trial thereafter. The Company will
need to raise between 6 and 10 million dollars in additional capital to do so,
but has chosen to wait until the completion of the IND application as it expects
to be able to do so on better terms at that time. If sufficient additional funds
are raised, or if a partnership is obtained for eye disease drug development,
those IND funds would be re-allocated to a cancer IND for AGX51 or one of its
other identified proprietary molecules derivative of AGX51. If successful, that
IND would be followed by Phase I/II clinical trials in patients with high risk
of metastatic progression at MSKCC, under the supervision of Dr. Larry Norton,
(Deputy Physician-in-Chief at MSKCC and Medical Director of the Evelyn H. Lauder
Breast Center) the Head of the AngioGenex Scientific Advisory Board. With the
initiation of these trials, designed to establish safety and proof of principle
in
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humans, the Id story will have come full circle, from a basic biological finding
in an academic lab to the discovery of an active chemical inhibitor to be tested
on real patients in a clinic at the very institute where it all began. If we
raise sufficient resources we would conduct both the oncology and ocular
programs simultaneously.
Our Experiments. The essential non-confidential information describing the
scientific foundation of AngioGenex' proprietary technology and its experimental
support is described in detail in the PCT patent application (see Exhibit 99.1
to our Form 10 filed with the SEC on September 29, 2017) and the following
publication: "Angiogenesis impairment in Id-deficient mice cooperates with an
Hsp90 inhibitor to completely suppress HER2 neu-dependent breast tumors" (Candia
et al, Proceedings of The National Academy of Sciences 2003). The aforementioned
PCT patent application describes numerous experiments that produced the data
supporting the patent claims. Additionally, the aforementioned publication
describes experiments with a widely accepted model of breast cancer with
experimental breast cancer prone "herceptin" mice.
The Path Forward. If we successfully complete the pre-clinical work, the next
step will be the first human clinical testing of AGX5? regarding safety and
preliminary efficacy. To do so we will seek further financing or a corporate
partner for the completion of testing and the ultimate marketing of the drug.
Our goal is to achieve interim milestones toward FDA approval in a number of
disease indications with distinct proprietary pharmaceutical products.
Financial History. As a research and development company, we have incurred
significant losses since inception. We had an accumulated deficit of $6,513,009
as of September 30, 2017. These losses have resulted principally from costs
incurred in connection with R&D activities, license fees and general and
administrative expenses.
2. Financial Information
Overview
The Company's drugs (including our two lead drug candidates AGX51 and its
derivative AGX51-?) are at the pre-clinical stage of development. Our Company
would like to ultimately develop different Id-inhibitor drugs to treat cancer
and macular degeneration. As a corporate strategy, the cancer program (i.e.
AGX51) is on hold pending the receipt of sufficient resources or partnerships
and we have determined to move first with the macular degeneration program (i.e.
AGX51-?).
For AGX51, the estimated timeframe and cost for completion of pre-clinical work
is approximately 15 to 18 months and approximately $1.5 million to $2 million so
that we can file an IND and the estimated cost to complete Phase I/IIA clinical
trials is approximately $12 million. For AGX51-?, the estimated timeframe and
cost for completion of pre-clinical work is approximately 15 to 18 months and
approximately $1.9 million so that we can file an IND and the estimated cost to
complete Phase I/IIA clinical trials is approximately $8 million to $12 million.
To elaborate, our team is poised to take one of our two lead compounds AGX51-?
through this pre-clinical testing in 15-18 months and then into the clinic for
testing in macular degeneration. Our current plan is to complete pre-clinical
work for the filing of an IND in the ocular indication initially and conduct a
Phase I/IIA clinical trial thereafter. The Company will need to raise between 6
and 10 million dollars in additional capital to do so, but has chosen to wait
until the completion of the IND application as it expects to be able to do so on
better terms at that time. If sufficient additional funds are raised, or if a
partnership is obtained for eye disease drug development, those IND funds would
be re-allocated to a cancer IND for AGX51 or one of its other identified
proprietary molecules derivative of AGX51. If successful, that IND would be
followed by Phase I/II clinical trials in patients with high risk of metastatic
progression at MSKCC, under the supervision of Dr. Larry Norton, (Deputy
Physician-in-Chief at MSKCC and Medical Director of the Evelyn H. Lauder Breast
Center) the Head of the AngioGenex Scientific Advisory Board. With the
initiation of these trials, designed to establish safety and proof of principle
in humans, the Id story will have come full circle, from a basic biological
finding in an academic lab to the discovery of an active chemical inhibitor to
be tested on real patients in a clinic at the very institute where it all began.
We have limited financial resources and we will need to raise substantial
additional funding in order to execute these plans. If we raise sufficient
resources we would conduct both the oncology and ocular programs simultaneously.
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Comparison of Results of Operations for the Three Months ended September 30,
2017 and 2016
Revenues
We had no revenues for the three months ended September 30, 2017 and September
30, 2016.
Research and Development Expenses
For the three months ended September 30, 2017 and 2016, total research and
development costs were $17,997 and $14,037, respectively. The increase is due to
expenditures related to our continued research into the role of the Id genes and
proteins, and its identification and development of molecules capable of
inhibiting Id activity and preventing the neo-vascularization that supports the
growth of cancerous tumors and characterizes other diseases including macular
degeneration. The Company incurred $100,000 in connection with research
performed at laboratories in the three months ended September 30, 2017.
Stock-based compensation of ($82,003) and $14,037 was included in research and
development expenses for the three months ended September 30, 2017 and 2016,
respectively.
General and Administrative Expenses
For the three months ended September 30, 2017 and 2016, total general and
administrative expenses were $99,980 and $126,389, respectively. General and
administrative expenses include office expenses, professional fees for
bookkeepers, auditors, and outside securities counsel who assisted with various
aspects of the business and business development, patent counsel fees and costs,
including the maintenance of existing intellectual property. The decrease is
comprised primarily of a decrease in professional fees.
We expect general and administrative expenses to increase overall through 2017
as we continue as a publicly reporting company. The non-recurring portions of
the process of returning to a public reporting status are complete. We
anticipate continued increased professional fee expenses associated with ongoing
public reporting requirements and increased use of outside accounting and legal
services for our continued operations and any financings.
Operating Loss
For the three months ended September 30, 2017, operating loss was $117,977 as
compared with $140,426 for the three months ended September 30, 2016. The
decrease in operating loss is due to decrease in professional fees offset by
additional expenditures related to research and development, which are described
above.
We expect to incur continued operating losses through 2017 as we continue to
develop Id Inhibitor drugs.
Interest Expense
Interest expense is comprised primarily of interest accrued on our debt. For the
three months ended September 30, 2017, the interest expense of approximately
$3,000 was essentially unchanged as compared with the same period in 2016.
Comparison of Results of Operations for the Nine Months ended September 30, 2017
and 2016
Revenues
We had no revenues for the nine months ended September 30, 2017 and September
30, 2016.
Research and Development Expenses
For the nine months ended September 30, 2017 and 2016, total research and
development costs were $252,923 and $67,996, respectively. The increase is due
to expenditures related to our continued research into the role of the Id genes
and proteins, and its identification and development of molecules capable of
inhibiting Id activity and preventing the neo-vascularization that supports the
growth of cancerous tumors and characterizes other diseases including macular
degeneration. Stock-based compensation of ($7,477) and $67,996 was included in
research and development expenses for the nine months ended September 30, 2017
and 2016, respectively. The Company
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incurred $260,400 in connection with research performed at laboratories for the
nine months ended September 30, 2017.
General and Administrative Expenses
For the nine months ended September 30, 2017 and 2016, total general and
administrative expenses were $357,890 and $376,614, respectively. General and
administrative expenses include office expenses, professional fees for
bookkeepers, auditors, and outside securities counsel who assisted with various
aspects of the business and business development, patent counsel fees and costs,
including the maintenance of existing intellectual property. The increase is due
to additional office expenses.
We expect general and administrative expenses to increase through 2017 as we
complete the process of returning to a public reporting status. Once the
non-recurring portions of the process of returning to a public reporting status
are complete, we anticipate continued increased professional fee expenses
associated with ongoing public reporting requirements and increased use of
outside accounting and legal services for our continued operations and any
financings.
Operating Loss
For the nine months ended September 30, 2017, operating loss was $610,813 as
compared with $444,610 for the nine months ended September 30, 2016. The
increase in operating loss is due to additional expenditures related to research
and development and professional fees associated with patent support and
accounting expenses, which are described above.
We expect to incur continued operating losses through 2017 as we continue to
develop Id Inhibitor drugs.
Interest Expense
Interest expense is comprised primarily of interest accrued on our debt. For the
nine months ended September 30, 2017, the interest expense of approximately
$8,000 was essentially unchanged as compared with the same period in 2016.
Liquidity and Capital Resources
We require significant additional cash resources to fund the expenditures
necessary to maintain our operating infrastructure, to pay for research and
development activities, and to pay our personnel and management team. As we seek
to further expand our pre-clinical and clinical programs and expand our
intellectual property portfolio, we will need cash to fund such activities and
enable in-licensing opportunities and other research and development endeavors.
The Company's significant development milestone is the filing of its first IND
application with the FDA for its lead drug candidate, AGX51-?, for the treatment
of macular degeneration. Reaching the goal of the filing of the IND will require
that the Company conduct animal toxicity studies in two separate species, a
series of tests to determine how the drug is absorbed, distributed and cleared
from the body, and a series of chemistry experiments to determine, among other
things, the stability and shelf life of the drug. The Company has contracted
with MSKCC to perform this work under the MSKCC Services Agreement. The timely
and successful completion of this work will allow the Company to seek FDA
permission in the 4th - quarter of 2018 to test AGX51-? in human volunteers via
the filing of an IND. The Company anticipates a total cost of approximately $1.9
million to accomplish this work in approximately eight to 24 months under the
current agreement with MSKCC. The Company lacks all of the funding necessary to
complete the tasks and will require additional capital to do so. The Company
intends to obtain the funds necessary to complete the pre-clinical work needed
to accomplish this significant milestone from new and existing investors and
insiders.
We have historically relied on financing activities to provide the cash needed
for our operating expenses. As of September 30, 2017, we had cash of $625,129.
Management believes that in order for the Company to meet its obligations
arising from normal business operations through November 2018 that the Company
requires additional capital either in the form of a private placement of
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common stock or debt that will generate sufficient operating cash flows to fund
operations. Without additional capital, the Company's ability to continue to
operate will be limited.
Without such financings, however, we would be unable to continue operations.
There can be no assurance that such equity or borrowings will be available or,
if available, will be at rates or prices acceptable to us. Our independent
registered public accounting firm has stated in their audit report on our
December 31, 2016 financial statements dated June 27, 2017 that there is
substantial doubt about our ability to continue as a going concern.
Operating Activities
Cash used for operating activities for the nine months ended September 30, 2017
was $397,342 compared to $82,726 for the same period in 2016. The increase is
due to increased activity related to research and development and professional
fees associated with patent support, auditing, bookkeeping and accounting
services.
Financing Activities
Cash provided by financing activities for the nine months ended September 30,
2017 was secured by issuance of 3,000,000 shares of common stock to related
parties at $0.25 per share for proceeds of $750,000. Cash provided by financing
activities for the nine months ended September 30, 2016 were secured through the
issuance of common stock for $100,000, and issuance of $5,000 notes payable, net
of $5,000 repayment.
Off-Balance Sheet Arrangements
At September 30, 2017, we had no off-balance sheet arrangements.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position,
results of operations, or cash flows due to adverse changes in financial and
commodity market prices and rates. As of September 30, 2017, we do not believe
we are exposed to significant market risks due to changes in United States
interest rates or foreign currency exchange rates as measured against the United
States dollar.
Inflation and Seasonality
We do not believe that our operations are significantly impacted by inflation.
Our business is not seasonal in nature.
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