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 The leading web portal for pharmacy resources, news, education and careers November 17, 2017
Pharmacy Choice - Pharmaceutical News - ANGIOGENEX, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations - November 17, 2017

Pharmacy News Article

 11/14/17 - ANGIOGENEX, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

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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