UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
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Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One):
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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As of August 11, 2021, the Registrant had shares of common stock, $0.01 par value per share, outstanding.
CELSION CORPORATION
QUARTERLY REPORT ON
FORM 10-Q
TABLE OF CONTENTS
| i |
Cautionary Note Regarding Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including, without limitation, any projections of earnings, revenue or other financial items, any statements of the plans and objectives of management for future operations (including, but not limited to, pre-clinical development, clinical trials, manufacturing and commercialization), uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, clinical trials, supply chain, strategy, goals and anticipated timelines, any statements concerning proposed drug candidates, potential therapeutic benefits, or other new products or services, any statements regarding future economic conditions or performance, any changes in the course of research and development activities and in clinical trials, any possible changes in cost and timing of development and testing, capital structure, financial condition, working capital needs and other financial items, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our industry, business, and operations, we cannot guarantee that actual results will not differ materially from our expectations.
Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the inherent uncertainty in the drug development process, our ability to raise additional capital to fund our planned future operations, our ability to obtain or maintain FDA and foreign regulatory approvals for our drug candidates, potential impact of the outbreak, duration and severity of the COVID-19 pandemic on our business, our ability to enroll patients in our clinical trials, risks relating to third parties conduct of our clinical trials, risks relating to government, private health insurers and other third-party payers coverage or reimbursement, risks relating to commercial potential of a drug candidate in development, changes in technologies for the treatment of cancer, impact of development of competitive drug candidates by others, risks relating to intellectual property, volatility in the market price of our common stock, potential inability to maintain compliance with The Nasdaq Marketplace Rules and the impact of adverse capital and credit market conditions. These and other risks, assumptions are described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in other documents that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements speak only as of the date they are made and we do not intend to update any forward-looking statements, except as required by law or applicable regulations. We operate in a highly competitive, highly regulated, and rapidly changing environment and our business is in a state of evolution. Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business or the extent to which any individual risk factor, combination of factors, or new or altered factors, may cause results to differ materially from those contained in any forward-looking statement.
Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Celsion,” “we,” “us,” and “our” refer to Celsion Corporation, a Delaware corporation and its wholly owned subsidiary CLSN Laboratories, Inc., also a Delaware corporation.
Trademarks
The Celsion brand and product names, including but not limited to Celsion® and ThermoDox® contained in this document are trademarks, registered trademarks or service marks of Celsion Corporation or its subsidiary in the United States (“U.S.”) and certain other countries. This document also contains references to trademarks and service marks of other companies that are the property of their respective owners.
| ii |
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CELSION CORPORATION
CONDENSED CONSOLIDATED
BALANCE SHEETS
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment in debt securities - available for sale, at fair value | ||||||||
| Accrued interest on investment in debt securities | ||||||||
| Advances and deposits on clinical programs and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment (at cost, less accumulated depreciation and amortization) | ||||||||
| Other assets: | ||||||||
| Money market investments, restricted cash | ||||||||
| Deferred income tax asset | ||||||||
| In-process research and development, net | ||||||||
| Goodwill | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Other intangible assets, net | ||||||||
| Deposits and other assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 1 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
BALANCE SHEETS
(Continued)
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable – trade | $ | $ | ||||||
| Other accrued liabilities | ||||||||
| Notes payable – current portion, net of deferred financing costs | ||||||||
| Operating lease liability - current portion | ||||||||
| Deferred revenue - current portion | ||||||||
| Total current liabilities | ||||||||
| Earn-out milestone liability | ||||||||
| Notes payable – non-current portion, net of deferred financing costs | ||||||||
| Operating lease liability - non-current portion | ||||||||
| Deferred revenue - non-current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred Stock - $par value (shares authorized, and shares issued or outstanding at June 30, 2021 and December 31, 2020) | ||||||||
| Common stock - $par value (shares authorized; and shares issued at June 30, 2021 and December 31, 2020, respectively, and and shares outstanding at June 30, 2021 and December 31, 2020, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity before treasury stock | ||||||||
| Treasury stock, at cost ( shares at June 30, 2021 and December 31, 2020) | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 2 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Licensing revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Gain (loss) from change in valuation of earn-out milestone liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Investment income | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized loss on extinguishment of debt | ( | ) | ( | ) | ||||||||||||
| Other (expense) income | ( | ) | ( | ) | ||||||||||||
| Total other (expense) income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
| 3 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Other comprehensive (loss) gain | ||||||||||||||||
| Changes in: | ||||||||||||||||
| Realized gains (losses) on debt securities recognized in investment income, net | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Unrealized (losses) gains on debt securities, net | ( | ) | ( | ) | ||||||||||||
| Change in unrealized (losses) gains on available for sale securities, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to the condensed consolidated financial statements.
| 4 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Change in fair value of earn-out milestone liability | ||||||||
| Recognition of deferred revenue | ( | ) | ( | ) | ||||
| Stock-based compensation costs | ||||||||
| Deferred income tax asset | ||||||||
| Amortization of deferred finance charges and debt discount associated with notes payable | ||||||||
| Net changes in: | ||||||||
| Accrued interest on investment securities | ( | ) | ||||||
| Advances, deposits, and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of investment securities | ( | ) | ( | ) | ||||
| Proceeds from sale and maturity of investment securities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock equity, net of issuance costs | ||||||||
| Proceeds from issuance of common stock upon conversion of stock warrants | ||||||||
| Proceeds from issuance of common stock upon conversion of stock options | ||||||||
| Proceeds from the SVB Loan Facility, net of issuance costs | ||||||||
| Payoff of the Horizon Credit Agreement and accrued end of term fees | ( | ) | ||||||
| Proceeds from Payroll Protection Program (PPP) loans | ||||||||
| Repayments on Payroll Protection Program (PPP) loans | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Increase in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 5 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | ( | ) | $ | ( | ) | ||
| Cash paid for amounts included in measurement of lease liabilities: | ||||||||
| Operating cash flows from lease payments | $ | $ | ||||||
| Common stock issued to settle accrued bonuses | $ | $ | ||||||
| Realized and unrealized gains (losses), net, on investment securities | $ | $ | ( | ) | ||||
See accompanying notes to the condensed consolidated financial statements.
| 6 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
THREE MONTHS ENDED JUNE 30, 2021 AND 2020
| Three Months Ended | Common Stock Outstanding | Additional Paid in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||
| June 30, 2021 | Shares | Amount | Capital | Shares | Amount | Income | Deficit | Total | ||||||||||||||||||||||||
| Balance at April 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Sale of equity through equity financing facilities | - | - | - | - | ||||||||||||||||||||||||||||
| Realized and unrealized gains and losses, net, on investments securities | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Three Months Ended | Common Stock Outstanding | Additional Paid in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||
| June 30, 2020 | Shares | Amount | Capital | Shares | Amount | Income | Deficit | Total | ||||||||||||||||||||||||
| Balance at April 1, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Sale of equity through equity financing facilities | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | - | - | - | - | ||||||||||||||||||||||||||||
| Realized and unrealized gains and losses, net, on investments securities | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 7 |
CELSION CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
(Unaudited)
SIX MONTHS ENDED JUNE 30, 2021 AND 2020
| Six Months Ended | Common Stock Outstanding | Additional Paid in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||
| June 30, 2021 | Shares | Amount | Capital | Shares | Amount | Income | Deficit | Total | ||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Sale of equity through equity financing facilities | - | - | - | - | ||||||||||||||||||||||||||||
| Shares issued upon exercise of common stock warrants, net of fees | - | - | - | - | ||||||||||||||||||||||||||||
| Shares issued upon exercise of options to purchase common stock | - | - | - | - | ||||||||||||||||||||||||||||
| Realized and unrealized gains and losses, net, on investments securities | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Six Months Ended | Common Stock Outstanding | Additional Paid in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||||||||
| June 30, 2020 | Shares | Amount | Capital | Shares | Amount | Income | Deficit | Total | ||||||||||||||||||||||||
| Balance at January 1, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Sale of equity through equity financing facilities | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | - | - | - | - | ||||||||||||||||||||||||||||
| Realized and unrealized gains and losses, net, on investments securities | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Common stock issued to settle accrued bonuses | - | - | - | - | ||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 8 |
CELSION CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 2021 AND 2020
Note 1. Business Description
Celsion Corporation (“Celsion” and the “Company”) is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments including DNA-based immunotherapies, next generation vaccines and directed chemotherapies through clinical trials and eventual commercialization. The Company’s product pipeline includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian cancer and ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently under investigator-sponsored development for several cancer indications. Celsion has two feasibility stage platform technologies for the development of novel nucleic acid-based immunotherapies and next generation vaccines and other anti-cancer DNA or RNA therapies. Both are novel synthetic, non-viral vectors with demonstrated capability in nucleic acid cellular transfection.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, CLSN Laboratories, Inc. and Celsion, GmbH, have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for a fair presentation, have been included in the accompanying unaudited condensed consolidated financial statements. Operating results for the three and six-month periods June 30, 2021 and 2020 are not necessarily indicative of the results that may be expected for any other interim period(s) or for any full year. For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (SEC) on March 19, 2021.
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amount reported in the Company’s financial statements and accompanying notes. Actual results could differ materially from those estimates. Events and conditions arising subsequent to the most recent balance sheet date have been evaluated for their possible impact on the financial statements and accompanying notes. The Company continues to monitor the impact of the COVID-19 pandemic on its financial condition and results of operations, along with the valuation of its long-term assets, intangible assets, and goodwill. The effect of this matter could potentially have an impact on the valuation of such assets in the future. The COVID-19 pandemic is discussed in more detail in Note 3 to the financial statements.
Note 3. Financial Condition and Business Plan
Since
inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research
and development programs, clinical trials conducted in connection with the Company’s product candidates, and applications and submissions
to the U.S. Food and Drug Administration. The Company has not generated significant revenue and has incurred significant net losses in
each year since our inception. As of June 30, 2021, the Company has incurred approximately $
The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its product candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The operating results of the Company have fluctuated significantly in the past.
| 9 |
In January 2020, the WHO declared an outbreak of coronavirus, COVID-19, to be a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. This virus has spread to over 100 countries, including the U.S. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations during 2020 and into 2021 due to COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows. The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19 pandemic. The disruptions caused by COVID-19 may also disrupt the clinical trials process and enrolment of patients. This may delay commercialization efforts. The Company continues to monitor its operating activities in light of these events. The specific impact, if any, is not readily determinable as of the date of these financial statements.
The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the following:
| ● | the progress of research activities; |
| ● | the number and scope of research programs; |
| ● | the progress of preclinical and clinical development activities; |
| ● | the progress of the development efforts of parties with whom the Company has entered into research and development agreements; |
| ● | the costs associated with additional clinical trials of product candidates; |
| ● | the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements; |
| ● | the ability to achieve milestones under licensing arrangements; |
| ● | the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and |
| ● | the costs and timing of regulatory approvals. |
On July 13, 2020, the Company announced that it has received a recommendation from the independent DMC to consider stopping the global Phase III OPTIMA Study of ThermoDox® in combination with RFA for the treatment of HCC, or primary liver cancer. The recommendation was made following the second pre-planned interim safety and efficacy analysis by the DMC on July 9, 2020. The DMC’s analysis found that the pre-specified boundary for stopping the trial for futility of 0.900 was crossed with an actual value of 0.903. The Company followed the advice of the DMC and considered its options to either stop the study or continue to follow patients after a thorough review of the data, and an evaluation of the probability of success. On February 11, 2021, the Company issued a letter to shareholders stating that the Company was notifying all clinical sites to discontinue following patients in the OPTIMA Study.
During
2020, 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses
as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program,
emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other
New Jersey-based companies. In 2018 and 2019, the Company sold NOLs totaling $
| 10 |
In
June 2018, the Company entered into a Credit Agreement with Horizon Technology Finance Corporation (“Horizon”) that provided
$
As
more fully discussed in Note 12, during 2021 through the date of the filing of this Quarterly Report on Form 10-Q, the Company has raised
approximately $
The Company has based its estimates on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s State of New Jersey net operating losses and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.
Note 4. New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting pronouncements will not have a material impact on the Company’s condensed consolidated financial position, results of operations, and cash flows, or do not apply to our operations.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which modifies the measurement of expected credit losses on certain financial instruments. The Company adopted ASU 2016-13 in the first quarter of 2021 utilizing the modified retrospective transition method. Based on the composition of the Company’s investment portfolio and current market conditions, the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The standard simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard during the first quarter of 2021. The adoption of ASU 2019-12 did not have a material impact on its consolidated financial statements.
In connection with the upcoming elimination of the London Inter-bank Offered Rate, (“LIBOR”) and other reference interest rates, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Reform on Financial Reporting. ASU 2020-04, which is available for contract modifications and hedging relationship modifications entered into or evaluated before December 31, 2022, provides certain practical expedients related to simplifying the accounting for contract modifications resulting from the change in terms from LIBOR to a new required interest rate benchmark. The Company is currently evaluating the effects of adopting this accounting standards update.
Note 5. Restricted Cash
As
a condition of the $
| 11 |
The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the condensed statement of cash flows:
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Money market investments, restricted | - | |||||||
| Total | $ | $ | ||||||
Basic loss per share is calculated based upon the net loss available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated after adjusting the denominator of the basic earnings per share computation for the effects of all dilutive potential common shares outstanding during the period. The dilutive effects of preferred stock, options and warrants and their equivalents are computed using the treasury stock method.
The
total number of shares of common stock issuable upon exercise of warrants, stock option grants and equity awards were and shares for the three and six-month periods ended
June 30, 2021 and 2020, respectively. Warrants with an exercise price of $
Note 7. Investment in Debt Securities Available for Sale
Investments
in debt securities available for sale with a fair value of $
Investments in debt securities available for sale are evaluated periodically to determine whether a decline in their value is other than temporary. The term “other than temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, to predict whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.
A summary of the cost, fair value and maturities of the Company’s short-term investments is as follows:
| June 30, 2021 | December 31, 2020 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Short-term investments | ||||||||||||||||
| Commercial paper | $ | $ | $ | |||||||||||||
| Government backed debt securities | - | - | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| June 30, 2021 | December 31, 2020 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Short-term investment maturities | ||||||||||||||||
| Within 3 months | $ | $ | $ | $ | ||||||||||||
| Between 3-12 months | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 12 |
The following table shows the Company’s investment in debt securities available for sale gross unrealized gains (losses) and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020. The Company has reviewed individual securities to determine whether a decline in fair value below the amortizable cost basis is other than temporary.
| June 30, 2021 | December 31, 2020 | |||||||||||||||
| Available for sale securities (all unrealized holding gains and losses are less than 12 months at date of measurement) | Fair Value | Unrealized Holding Gains (Losses) | Fair Value | Unrealized Holding Gains (Losses) | ||||||||||||
| Investments with unrealized gains | $ | $ | $ | $ | ||||||||||||
| Investments with unrealized losses | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ||||||||||
Investment (loss) income, which includes net realized losses on sales of available for sale securities and investment income interest and dividends, is summarized as follows:
Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Interest and dividends accrued and paid | $ | $ | ||||||
| Realized (losses) gains | ( | ) | ||||||
| Investment (loss) income, net | $ | ( | ) | $ | ||||
Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Interest and dividends accrued and paid | $ | $ | ||||||
| Realized (losses) gains | ( | ) | ||||||
| Investment income, net | $ | $ | ||||||
Note 8. Fair Value Measurements
FASB ASC Section 820, Fair Value Measurements and Disclosures establishes a three-level hierarchy for fair value measurements which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:
Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.
Cash and cash equivalents, other current assets, accounts payable and other accrued liabilities are reflected in the condensed consolidated balance sheet at their approximate estimated fair values primarily due to their short-term nature. The fair values of securities available for sale is determined by relying on the securities’ relationship to other benchmark quoted securities and classified its investments as Level 2 items in both 2021 and 2020. There were no transfers of assets or liabilities between Level 1 and Level 2 and no transfers in or out of Level 3 during the six-months ended June 30, 2021 or during the year ended December 31, 2020. The changes in Level 3 liabilities were the result of changes in the fair value of the earn-out milestone liability included in earnings and in-process R&D. The earnout milestone liability is valued using a risk-adjusted assessment of the probability of payment of each milestone, discounted to present value using an estimated time to achieve the milestone (see Note 14).
| 13 |
Assets and liabilities measured at fair value are summarized below:
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Recurring items as of June 30, 2021 | ||||||||||||||||
| Investment in debt securities - available for sale, at fair value | $ | $ | $ | $ | ||||||||||||
| Non-recurring items as of June 30, 2021 | ||||||||||||||||
| In-process R&D (Note 9) | $ | $ | $ | $ | ||||||||||||
| Non-recurring items as of December 31, 2020 | ||||||||||||||||
| In-process R&D (Note 9) | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Recurring items as of June 30, 2021 | ||||||||||||||||
| Earn-out milestone liability (Note 14) | $ | $ | $ | $ | ||||||||||||
| Recurring items as of December 31, 2020 | ||||||||||||||||
| Earn-out milestone liability (Note 14) | $ | $ | $ | $ | ||||||||||||
Note 9. Intangible Assets
In June 2014, we completed the acquisition of substantially all of the assets of EGEN, Inc., an Alabama corporation, which has changed its company name to EGWU, Inc. after the closing of the acquisition (“EGEN”). We acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.
Acquired In-process Research and Development
Acquired
in-process research and development (IPR&D) consists of EGEN’s drug technology platforms: TheraPlas and TheraSilence. The fair
value of the IPR&D drug technology platforms was estimated to be $
The
Company’s ovarian cancer indication, with original value of $
The
Company’s GBM candidate, with original value of $
| 14 |
Covenants Not to Compete
Pursuant
to the EGEN Purchase Agreement, EGEN provided certain covenants (“Covenant Not To Compete”) to the Company whereby EGEN agreed,
during the period ending on the seventh anniversary of the closing date of the acquisition on June 20, 2014, not to enter into any business,
directly or indirectly, which competes with the business of the Company nor will it contact, solicit or approach any of the employees
of the Company for purposes of offering employment. The Covenant Not to Compete which was valued at approximately $
Goodwill
The
purchase price exceeded the estimated fair value of the net assets acquired by approximately $
Following is a summary of the net fair value of the assets acquired in the EGEN asset acquisition for the six-month period ended June 30, 2021:
| IPR&D | Goodwill | Covenant Not To Compete | ||||||||||
| For the six-months ended June 30, 2021 | ||||||||||||
| Balance at January 1, 2021, net | $ | $ | $ | |||||||||
| Amortization | ( | ) | ||||||||||
| Balance at June 30, 2021, net | $ | $ | $ | |||||||||
Note 10. Accrued Liabilities
Other accrued liabilities at June 30, 2021 and December 31, 2020 include the following:
| June 30, 2021 | December 31, 2020 | |||||||
| Amounts due to contract research organizations and other contractual agreements | $ | $ | ||||||
| Accrued payroll and related benefits | ||||||||
| Accrued professional fees | ||||||||
| Accrued interest | - | |||||||
| Other | ||||||||
| Total | $ | $ | ||||||
Note 11. Notes Payable
The SVB Loan Facility
On
June 18, 2021, the Company entered into a $
| 15 |
The
SVB Loan Facility is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate
(currently
In
connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $
Following is a schedule of future principal payments, net of unamortized debt discounts and amortized end-of-term fee, due on the SVB Loan Facility:
| As of June 30, | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 and thereafter | ||||
| Subtotal of future principal payments | ||||
| Unamortized debt premium, net | ( | ) | ||
| Total | $ | |||
Horizon Credit Agreement
On
June 27, 2018, the Company entered into a loan agreement with Horizon Technology Finance Corporation (“Horizon”) that provided
$
Pursuant
to the Amendment, the remaining $
In
connection with the Horizon Credit Agreement, the Company incurred financing fees and expenses totaling $
| 16 |
As
a fee in connection with the Horizon Credit Agreement, Celsion issued Horizon warrants exercisable for a total of
The New Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. Effective October 27, 2020. The Horizon Credit Agreement contains customary representations, warranties and affirmative and negative covenants including, among other things, covenants that limit or restrict Celsion’s ability to grant liens, incur indebtedness, make certain restricted payments, merge, or consolidate and make dispositions of assets.
The
Amendment was evaluated in accordance with FASB ASC 470-50, Debt-Modifications and Extinguishments, for debt modification and
extinguishment accounting. We accounted for the $
We
accounted for the remaining $5 million of obligation under the Amendment as a debt modification to the initial agreement with respect
to the minor changes in cash flows. Also, in connection with the $5 million remaining obligations, we recorded $
During
the three and six-month periods ended June 30, 2021, the Company incurred $
On June 18, 2021, as a condition of entering into the SVB Loan Facility, the Company paid the outstanding principal balance, an early termination fee and the end of term charges in full satisfaction of the Horizon Credit Agreement, as amended. Following is a schedule of the amounts paid to Horizon on June 18, 2021.
| Principal balance at June 18, 2021 | $ | |||
| Early termination fees | ||||
| End of term charges | ||||
| Total | $ |
During
the three and six months ended June 30, 2021, the Company recorded a loss of $
Note 12. Stockholders’ Equity
In
September 2018, the Company filed with the SEC a $
| 17 |
On
March 19, 2021, the Company filed with the SEC a new $
Capital on DemandTM Sales Agreement
On
December 4, 2018, the Company entered into the Capital on Demand Agreement with JonesTrading, pursuant to which the Company may offer
and sell, from time to time, through JonesTrading shares of Common Stock having an aggregate offering price of up to $
During
2020 through June 30, 2020, the Company sold and issued an aggregate of million shares under the Capital on Demand
Agreement, receiving approximately $
Registered Direct Offering
On
February 27, 2020, we entered into a Securities Purchase Agreement (the “February 2020 Purchase Agreement”) with several
institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering (the “February 2020
Offering”), an aggregate of shares
of our common stock at an offering price of $per
Share for gross proceeds of approximately $
Underwritten Offering
On
June 22, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co.
Inc. (the “Underwriter”), relating to the issuance and sale (the “Underwritten Offering”) of shares of the Company’s common stock. Pursuant
to the terms of the Underwriting Agreement, the Underwriter agreed to purchase the shares at a price of $per share. The Underwriter offered the shares
at a public offering price of $per share, reflecting an underwriting discount
equal to $,
or
Pursuant to the Underwriting Agreement, until December 31, 2020, the Underwriter had a right of first refusal to act as sole underwriter, initial purchaser, placement/selling agent, or arranger, as the case may be, on any new financing for the Company (excluding equipment lease financings, loans or grants from governmental authorities or in connection with government programs and financings relating to or sales of tax attributes) during such period. The Underwriter common stock the sole right to determine whether or not any other broker dealer shall have the right to participate in any such offering and the economic terms of any such participation.
January 2021 Registered Direct Offering
On
January 22, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with several
institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “January
2021 Offering”), an aggregate of shares of the Company’s common stock at
an offering price of $per share for gross proceeds of approximately
$
| 18 |
March 2021 Registered Direct Offering
On
March 31, 2021, the Company entered into a Securities Purchase Agreement (the “March 2021 Purchase Agreement”) with several
institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “March 2021
Offering”), an aggregate of shares of the Company’s common stock, at
an offering price of $per share for gross proceeds of approximately
$
Under the March 2021 Purchase Agreement and March 2021 Placement Agent Agreement, the Company and its subsidiaries are prohibited, for a period of 90 days after the closing, from entering into any agreement to issue or announcing any issuance or proposed issuance of common stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive common stock without the prior written consent of AGP or the investors participating in the offering. For purposes of this offering, AGP and the investors from the Company’s January 2021 Offering waived a similar 90-day restriction in the placement agent agreement and purchase agreement for that transaction.
LPC Purchase Agreement
On
September 8, 2020, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) and a Registration Rights
Agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant
to which, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right to sell to Lincoln
Park up to $million of shares of the Company’s common
stock at the Company’s discretion as described below (the “LPC Offering”). During 2020, the Company sold and issued
an aggregate of million shares, including the commitment shares, under the LPC Purchase Agreement,
receiving approximately $
The Company has long-term compensation plans that permit the granting of equity-based awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, and performance awards.
At the 2018 Annual Stockholders Meeting of the Company held on May 15, 2018, stockholders approved the Celsion Corporation 2018 Stock Incentive Plan (the “2018 Plan”). The 2018 Plan, as adopted, permits the granting of shares of Celsion common stock as equity awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, performance awards, or in any combination of the foregoing. At the 2019 Annual Stockholders Meeting of the Company held on May 14, 2019, stockholders approved an amendment to the 2018 Plan whereby the Company increased the number of common stock shares available by to a total of under the 2018 Plan, as amended. Prior to the adoption of the 2018 Plan, the Company had maintained the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”). At the 2020 Annual Stockholders Meeting of the Company held on June 15, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by to a total of under the 2018 Plan, as amended. At the 2021 Annual Stockholders Meeting of the Company held on June 10, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by to a total of under the 2018 Plan, as amended.
The
Company has issued stock awards to employees and directors in the form of stock options and restricted stock.
| 19 |
Option and restricted stock awards vest upon terms determined by the Compensation Committee of the Board of Directors and are subject to accelerated vesting in the event of a change of control or certain terminations of employment. The Company issues new shares to satisfy its obligations from the exercise of options or the grant of restricted stock awards.
On September 28, 2018, and again on February 19, 2019, the Compensation Committee of the Board of Directors approved the grant of (i) inducement stock options (the “Inducement Option Grants”) to purchase a total of and shares of Celsion common stock, respectively and (ii) inducement restricted stock awards (the “Inducement Stock Grants”) totaling and shares of Celsion common stock to five new employees collectively. Each award has a grant date of the date of grant. Each Inducement Option Grant has an exercise price per share equal to $and $which represents the closing price of Celsion’s common stock as reported by Nasdaq on September 28, 2018 and February 19, 2019, respectively. Each Inducement Option Grant will vest over , with one-third vesting on the one-year anniversary of the employee’s first day of employment with the Company and one-third vesting on the second and third anniversaries thereafter, subject to the new employee’s continued service relationship with the Company on each such date. Each Inducement Option Grant has a ten-year term and is subject to the terms and conditions of the applicable stock option agreement. Each of Inducement Stock Grant vested on the one-year anniversary of the employee’s first day of employment with the Company is subject to the new employee’s continued service relationship with the Company through such date and is subject to the terms and conditions of the applicable restricted stock agreement.
As of June 30, 2021, there were a total of shares of Celsion common stock reserved for issuance under the 2018 Plan, which were comprised of shares of Celsion common stock subject to equity awards previously granted under the 2018 Plan and 2007 Plan and shares of Celsion common stock available for future issuance under the 2018 Plan. As of June 30, 2021, there were a total of shares of Celsion common stock subject to outstanding inducement awards.
Total compensation cost related to stock options and restricted stock awards amounted to $and $for the three-month periods ended June 30, 2021 and 2020, respectively. Of these amounts, $and $was charged to research and development during the three-month periods ended June 30, 2021 and 2020, respectively, and $and $was charged to general and administrative expenses during the three-month periods ended June 30, 2021 and 2020, respectively.
Total compensation cost related to stock options and restricted stock awards amounted to $and $for the six-month periods ended June 30, 2021 and 2020, respectively. Of these amounts, $and $was charged to research and development during the six-month periods ended June 30, 2021 and 2020, respectively, and $and $was charged to general and administrative expenses during the six-month periods ended June 30, 2021 and 2020, respectively.
As of June 30, 2021, there was $million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of years. The weighted average grant date fair values of the stock options granted was $and $during the six-month periods ended June 30, 2021 and 2020, respectively. A summary of stock option awards and restricted stock grants for the three-months ended June 30, 2021 is presented below:
| Stock Options | Restricted Stock Awards | Weighted Average | ||||||||||||||||||
Options Outstanding | Weighted Average Exercise Price | Non-vested Restricted Stock Outstanding | Weighted Average Grant Date Fair Value | Contractual Terms of Equity Awards (in years) | ||||||||||||||||
| Equity awards outstanding at January 1, 2021 | $ | $ | ||||||||||||||||||
| Equity awards granted | $ | $ | ||||||||||||||||||
| Equity awards exercised or vested and issued | ( | ) | $ | $ | ||||||||||||||||
| Equity awards forfeited, cancelled or expired | ( | ) | $ | $ | ||||||||||||||||
| Equity awards outstanding at June 30, 2021 | $ | $ | ||||||||||||||||||
| Aggregate intrinsic value of outstanding equity awards at June 30, 2021 | $ | $ | ||||||||||||||||||
| Equity awards exercisable at June 30, 2021 | $ | |||||||||||||||||||
| Aggregate intrinsic value of equity awards exercisable at June 30, 2021 | $ | |||||||||||||||||||
| 20 |
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Risk-free interest rate | to | % | to | % | ||||
| Expected volatility | to | % | to | % | ||||
| Expected life (in years) | to | to | ||||||
| Expected dividend yield | % | % | ||||||
Expected volatilities utilized in the model are based on historical volatility of the Company’s stock price. The risk-free interest rate is derived from values assigned to U.S. Treasury bonds with terms that approximate the expected option lives in effect at the time of grant.
Note 14. Earn-Out Milestone Liability
On
March 28, 2019, the Company and EGWU, Inc, entered into an amendment to its purchase agreement (“Amended Asset Purchase Agreement”),
whereby payment of the earnout milestone liability related to the Ovarian Cancer Indication of $
| a) | $ |
| b) | $ |
As
of June 30, 2021, March 31, 2021, and December 31, 2020, the Company fair valued the earn-out milestone liability at $
As
of June 30, 2020, March 31, 2020, and December 31, 2019, the Company fair valued the earn-out milestone liability at $
The following is a summary of the changes in the earn-out milestone liability for the six-month period ended June 30, 2021:
| Balance at January 1, 2021 | $ | ( | ) | |
| Non-cash loss from the change in fair value | ( | ) | ||
| Balance at June 30, 2021 | $ | ( | ) |
The following is a schedule of the Company’s risk-adjustment assessment of each milestone:
| Date | Risk-adjustment Assessment of Achieving Each Milestone | Discount Rate | Estimated Time to Achieve | |||||||
| June 30, 2021 | % | % | ||||||||
| March 31, 2021 | % | % | ||||||||
| December 31, 2020 | % | % | ||||||||
| June 30, 2020 | % | % | ||||||||
| March 31, 2020 | % | % | ||||||||
| December 31, 2019 | % | % | ||||||||
| 21 |
Note 15. Warrants
Following is a summary of all warrant activity for the six months ended June 30, 2021:
| Warrants | Number
of Issued | Weighted Average Exercise Price | ||||||
| Warrants outstanding at December 31, 2020 | $ | |||||||
| Warrants exercised during the six months ended June 30, 2021 (see Note 12) | ( | ) | $ | |||||
| Warrants outstanding at June 30, 2021 | $ | |||||||
| Aggregate intrinsic value of outstanding warrants at June 30, 2021 | $ | |||||||
| Weighted average remaining contractual terms at June 30, 2021 | years | |||||||
Note 16. Leases
We
adopted ASC Topic 842 on January 1, 2019 using the modified retrospective transition method for all lease arrangements at the beginning
of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC 842, while prior period amounts
were not adjusted and continue to be reported in accordance with our historic accounting under Topic 840, Leases. The standard had a
material impact on our Condensed Consolidated Balance Sheet but had no impact on our condensed consolidated net earnings and cash flows.
The most significant impact of adopting ASC Topic 842 was the recognition of the right-of-use (ROU) asset and lease liabilities for operating
leases, which are presented in the following three-line items on the Consolidated Condensed Balance Sheet: (i) operating lease right-of-use
asset; (ii) current operating lease liabilities; and (iii) operating lease liabilities. Therefore, on date of adoption of ASC Topic 842,
the Company recognized a ROU asset of $
| 22 |
Following is a table of the lease payments and maturity of our operating lease liabilities as of June 30, 2021:
For the year
ending | ||||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 and thereafter | - | |||
| Subtotal future lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease liabilities | $ | |||
| Weighted average remaining life | ||||
| Weighted average discount rate | % | |||
For
the three-month and six-month periods ended June 30, 2021, operating lease expense was $
Note 17. Technology Development and Licensing Agreements
On May 7, 2012, the Company entered into a long-term commercial supply agreement with Zhejiang Hisun Pharmaceutical Co. Ltd. (Hisun) for the production of ThermoDox® in the China territory. In accordance with the terms of the agreement, Hisun will be responsible for providing all of the technical and regulatory support services, including the costs of all technical transfer, registration and bioequivalence studies, technical transfer costs, Celsion consultative support costs and the purchase of any necessary equipment and additional facility costs necessary to support capacity requirements for the manufacture of ThermoDox®. Celsion will repay Hisun for the aggregate amount of these development costs and fees commencing on the successful completion of three registration batches of ThermoDox®. Hisun is also obligated to certain performance requirements under the agreement. The agreement will initially be limited to a percentage of the production requirements of ThermoDox® in the China territory with Hisun retaining an option for additional global supply after local regulatory approval in the China territory. In addition, Hisun will collaborate with Celsion around the regulatory approval activities for ThermoDox® with the China State Food and Drug Administration (CHINA FDA). During the first quarter of 2015, Hisun completed the successful manufacture of three registration batches of ThermoDox®.
On
January 18, 2013, we entered into a technology development contract with Hisun, pursuant to which Hisun paid us a non-refundable research
and development fee of $
On July 19, 2013, the Company and Hisun entered into a Memorandum of Understanding to pursue ongoing cooperation for the continued clinical development of ThermoDox® as well as the technology transfer relating to the commercial manufacture of ThermoDox® for the China territory. This expanded level of cooperation includes development of the next generation liposomal formulation with the goal of creating safer, more efficacious versions of marketed cancer chemotherapeutics.
Among the key provisions of the Celsion-Hisun Memorandum of Understanding are:
| ● | Hisun will provide the Company with internal resources necessary to complete the technology transfer of the Company’s proprietary manufacturing process and the production of registration batches for the China territory; |
| ● | Hisun will coordinate with the Company around the clinical and regulatory approval activities for ThermoDox® as well as other liposomal formations with the CHINA FDA; and |
| ● | Hisun will be granted a right of first offer for a commercial license to ThermoDox® for the sale and distribution of ThermoDox® in the China territory. |
| 23 |
On August 8, 2016, we signed a Technology Transfer, Manufacturing and Commercial Supply Agreement (“GEN-1 Agreement”) with Hisun to pursue an expanded partnership for the technology transfer relating to the clinical and commercial manufacture and supply of GEN-1, Celsion’s proprietary gene mediated, IL-12 immunotherapy, for the greater China territory, with the option to expand into other countries in the rest of the world after all necessary regulatory approvals are in effect. The GEN-1 Agreement will help to support supply for both ongoing and planned clinical studies in the U.S., and for potential future studies of GEN-1 in China. GEN-1 is currently being evaluated by Celsion in first line ovarian cancer patients.
Key provisions of the GEN-1 Agreement are as follows:
| ● | the GEN-1 Agreement has targeted unit costs for clinical supplies of GEN-1 that are substantially competitive with the Company’s current suppliers; |
| ● | once approved, the cost structure for GEN-1 will support rapid market adoption and significant gross margins across global markets; |
| ● | Celsion will provide Hisun a certain percentage of China’s commercial unit demand, and separately of global commercial unit demand, subject to regulatory approval; |
| ● | Hisun and Celsion will commence technology transfer activities relating to the manufacture of GEN-1, including all studies required by CHINA FDA for site approval; and |
| ● | Hisun will collaborate with Celsion around the regulatory approval activities for GEN-1 with the CHINA FDA. A local China partner affords Celsion access to accelerated CHINA FDA review and potential regulatory exclusivity for the approved indication. |
The
Company evaluated the Hisun arrangement in accordance with ASC 606 and determined that its performance obligations under the agreement
include the non-exclusive, royalty-free license, research and development services to be provided by the Company, and its obligation
to serve on a joint committee. The Company concluded that the license was not distinct since its value is closely tied to the ongoing
research and development activities. As such, the license and the research and development services are bundled as a single performance
obligation. Since the provision of the license and research and development services are considered a single performance obligation,
the $
Note 18. Commitments and Contingencies
On September 20, 2019, a purported stockholder of the Company filed a derivative and putative class action lawsuit against the Company and certain officers and directors (the “Shareholder Action”). The Company was a defendant in this derivative and putative class action lawsuit in the Superior Court of New Jersey, Chancery Division, filed by a shareholder against the Company (as both a class action defendant and nominal defendant), and certain of its officers and directors (the “Individual Defendants”), with the caption O’Connor v. Braun et al., Docket No. MER-C-000068-19 (the “Shareholder Action”). The Shareholder Action alleged breaches of the defendants’ fiduciary duties based on allegations that the defendants omitted or made improper statements when seeking shareholder approval of the 2018 Stock Incentive Plan. The Shareholder Action sought, among other things, any damages sustained by the Company as a result of the defendants’ alleged wrongdoing, a declaratory judgment against all defendants invalidating the 2018 Stock Incentive Plan and declaring any awards made under the Plan invalid, rescinded, and subject to disgorgement, an order disgorging the equity awards granted to the Individual Defendants under the 2018 Stock Incentive Plan, and attorneys’ fees and costs.
On
April 24, 2020, the Company, the Individual Defendants, and the plaintiff (the “Parties”) entered into a Settlement Agreement
and Release (the “Settlement Agreement”), which memorializes the terms of the Parties’ settlement of the Shareholder
Action (the “Settlement”). The Settlement calls for repricing of certain stock options and payment of plaintiff legal fees
of $
On October 29, 2020, a putative securities class action was filed against the Company and certain of its officers and directors (the “Spar Individual Defendants”) in the U.S. District Court for the District of New Jersey, captioned Spar v. Celsion Corporation, et al., Case No. 1:20-cv-15228. The plaintiff alleges that the Company and Individual Defendants made false and misleading statements regarding one of the Company’s product candidates, ThermoDox®, and brings claims for damages under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all Defendants, and under Section 20(a) of the Exchange Act of 1934 against the Spar Individual Defendants. The Company believes that the case is without merit and intends to defend it vigorously. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
In February 2021, a derivative shareholder lawsuit was filed against the Company, as the nominal defendant, and certain of its directors and officers as defendants in the U.S. District Court for the District of New Jersey, captioned Fidler v. Michael H. Tardugno et al., Case No. 3:21-cv-02662. The plaintiff alleges breach of fiduciary duty and other claims arising out of alleged statements made by certain of the Company’s directors and/or officers regarding ThermoDox®. The Company believes it has meritorious defenses to these claims and intends to vigorously contest this suit. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed above under “Cautionary Note Regarding Forward-Looking Statements”, and in Item 1A. Risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Strategic and Clinical Overview
Celsion Corporation (“Celsion” and the “Company”) is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments including DNA-based immunotherapies, next generation vaccines and directed chemotherapies through clinical trials and eventual commercialization. The Company’s product pipeline includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian cancer and ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently under investigator-sponsored development for several cancer indications. Celsion has two feasibility stage platform technologies for the development of novel nucleic acid-based immunotherapies and next generation vaccines and other anti-cancer DNA or RNA therapies. Both are novel synthetic, non-viral vectors with demonstrated capability in nucleic acid cellular transfection.
IMMUNO-ONCOLOGY Program
On June 20, 2014, the Company completed the acquisition of substantially all of the assets of EGEN, a private company located in Huntsville, Alabama. Pursuant to the Asset Purchase Agreement, CLSN Laboratories acquired all of EGEN’s right, title and interest in substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. A key asset acquired from EGEN was the TheraPlas technology platform. The first drug candidate developed from this technology platform is GEN-1.
THERAPLAS Technology Platform
TheraPlas is a technology platform for the delivery of DNA and mRNA therapeutics via synthetic non-viral carriers and is capable of providing cell transfection for double-stranded DNA plasmids and large therapeutic RNA segments such as mRNA. There are two components of the TheraPlas system, a plasmid DNA or mRNA payload encoding a therapeutic protein, and a delivery system. The delivery system is designed to protect the DNA/mRNA from degradation and promote trafficking into cells and through intracellular compartments. We designed the delivery system of TheraPlas by chemically modifying the low molecular weight polymer to improve its gene transfer activity without increasing toxicity. We believe that TheraPlas may be a viable alternative to current approaches to gene delivery due to several distinguishing characteristics, including enhanced molecular versatility that allows for complex modifications to potentially improve activity and safety.
The design of the TheraPlas delivery system is based on molecular functionalization of polyethyleneimine (PEI), a cationic delivery polymer with a distinct ability to escape from the endosomes due to heavy protonation. The transfection activity and toxicity of PEI is tightly coupled to its molecular weight; therefore, the clinical application of PEI is limited. We have used molecular functionalization strategies to improve the activity of low molecular weight PEIs without augmenting their cytotoxicity. In one instance, chemical conjugation of a low molecular weight branched BPEI1800 with cholesterol and polyethylene glycol (PEG) to form PEG-PEI-Cholesterol (PPC) dramatically improved the transfection activity of BPEI1800 following in vivo delivery. Together, the cholesterol and PEG modifications produced approximately 20-fold enhancement in transfection activity. Biodistribution studies following intraperitoneal or subcutaneous administration of DNA/PPC nanocomplexes showed DNA delivery localized primarily at the injection site with only small amount escaping into the systemic circulation. PPC is the delivery component of our lead TheraPlas product, GEN-1, which is in clinical development for the treatment of ovarian cancer. The PPC manufacturing process has been scaled up from bench scale (1-2 g) to 0.6Kg, and several current Good Manufacturing Practice (“cGMP”) lots have been produced with reproducible quality.
We believe that TheraPlas has emerged as a viable alternative to current approaches due to several distinguishing characteristics such as strong molecular versatility that may allow for complex modifications to potentially improve activity and safety with little difficulty. The biocompatibility of these polymers reduces the risk of adverse immune response, thus allowing for repeated administration. Compared to naked DNA or cationic lipids, TheraPlas is generally safer, more efficient, and cost effective. We believe that these advantages place Celsion in a strong position to capitalize on this technology platform.
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Ovarian Cancer Overview
Ovarian cancer is the most lethal of gynecological malignancies among women with an overall five-year survival rate of 45%. This poor outcome is due in part to the lack of effective prevention and early detection strategies. There were approximately 22,000 new cases of ovarian cancer in the U.S. in 2014 with an estimated 14,000 deaths. Mortality rates for ovarian cancer declined very little in the last forty years due to the unavailability of detection tests and improved treatments. Most women with ovarian cancer are not diagnosed until Stages III or IV, when the disease has spread outside the pelvis to the abdomen and areas beyond causing swelling and pain, where the five-year survival rates are 25 - 41 percent and 11 percent, respectively. First-line chemotherapy regimens are typically platinum-based combination therapies. Although this first line of treatment has an approximate 80 percent response rate, 55 to 75 percent of women will develop recurrent ovarian cancer within two years and ultimately will not respond to platinum therapy. Patients whose cancer recurs or progresses after initially responding to surgery and first-line chemotherapy have been divided into one of the two groups based on the time from completion of platinum therapy to disease recurrence or progression. This time period is referred to as platinum-free interval. The platinum-sensitive group has a platinum-free interval of longer than six months. This group generally responds to additional treatment with platinum-based therapies. The platinum-resistant group has a platinum-free interval of shorter than six months and is resistant to additional platinum-based treatments. Pegylated liposomal doxorubicin, topotecan, and Avastin are the only approved second-line therapies for platinum-resistant ovarian cancer. The overall response rate for these therapies is 10 to 20 percent with median overall survival (“OS”) of eleven to twelve months. Immunotherapy is an attractive novel approach for the treatment of ovarian cancer particularly since ovarian cancers are considered immunogenic tumors. IL-12 is one of the most active cytokines for the induction of potent anti-cancer immunity acting through the induction of T-lymphocyte and natural killer cell proliferation. The precedence for a therapeutic role of IL-12 in ovarian cancer is based on epidemiologic and preclinical data.
GEN-1 Immunotherapy
GEN-1 is a DNA-based immunotherapeutic product candidate for the localized treatment of ovarian cancer by intraperitoneally administering an Interleukin-12 (“IL-12”) plasmid formulated with our proprietary TheraPlas delivery system. In this DNA-based approach, the immunotherapy is combined with a standard chemotherapy drug, which can potentially achieve better clinical outcomes than with chemotherapy alone. We believe that increases in IL-12 concentrations at tumor sites for several days after a single administration could create a potent immune environment against tumor activity and that a direct killing of the tumor with concomitant use of cytotoxic chemotherapy could result in a more robust and durable antitumor response than chemotherapy alone. We believe the rationale for local therapy with GEN-1 is based on the following:
| ● | Loco-regional production of the potent cytokine IL-12 avoids toxicities and poor pharmacokinetics associated with systemic delivery of recombinant IL-12; | |
| ● | Persistent local delivery of IL-12 lasts up to one week and dosing can be repeated; and | |
| ● | Local therapy is ideal for long-term maintenance therapy. |
OVATION I Study. In February 2015, we announced that the U.S. Food and Drug Administration (“FDA”) accepted, without objection, the Phase I dose-escalation clinical trial of GEN-1 in combination with the standard of care in neoadjuvant ovarian cancer (the “OVATION I Study”). On September 30, 2015, we announced enrollment of the first patient in the OVATION I Study. The OVATION I Study was designed to:
| (i) | identify a safe, tolerable and therapeutically active dose of GEN-1 by recruiting and maximizing an immune response; | |
| (ii) | enroll three to six patients per dose level and evaluate safety and efficacy; and | |
| (iii) | attempt to define an optimal dose for a follow-on Phase I/II study. |
In addition, the OVATION I Study established a unique opportunity to assess how cytokine-based compounds such as GEN-1, directly affect ovarian cancer cells and the tumor microenvironment in newly diagnosed ovarian cancer patients. The study was designed to characterize the nature of the immune response triggered by GEN-1 at various levels of the patients’ immune system, including:
| ● | Infiltration of cancer fighting T-cell lymphocytes into primary tumor and tumor microenvironment including peritoneal cavity, which is the primary site of metastasis of ovarian cancer; | |
| ● | Changes in local and systemic levels of immuno-stimulatory and immunosuppressive cytokines associated with tumor suppression and growth, respectively; and | |
| ● | Expression profile of a comprehensive panel of immune related genes in pre-treatment and GEN-1-treated tumor tissue. |
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We initiated the OVATION I Study at four clinical sites at the University of Alabama at Birmingham, Oklahoma University Medical Center, Washington University in St. Louis, and the Medical College of Wisconsin. During 2016 and 2017, we announced data from the first fourteen patients in the OVATION I Study. On October 3, 2017, we announced final translational research and clinical data from the OVATION I Study.
Key translational research findings from all evaluable patients are consistent with the earlier reports from partial analysis of the data and are summarized below:
| ● | The intraperitoneal treatment of GEN-1 in conjunction with NACT resulted in dose dependent increases in IL-12 and Interferon-gamma (IFN-γ) levels that were predominantly in the peritoneal fluid compartment with little to no changes observed in the patients’ systemic circulation. These and other post-treatment changes including decreases in VEGF levels in peritoneal fluid are consistent with an IL-12 based immune mechanism; | |
| ● | Consistent with the previous partial reports, the effects observed in the IHC analysis were pronounced decreases in the density of immunosuppressive T-cell signals (Foxp3, PD-1, PDL-1, IDO-1) and increases in CD8+ cells in the tumor microenvironment; | |
| ● | The ratio of CD8+ cells to immunosuppressive cells was increased in approximately 75% of patients suggesting an overall shift in the tumor microenvironment from immunosuppressive to pro-immune stimulatory following treatment with GEN-1. An increase in CD8+ to immunosuppressive T-cell populations is a leading indicator and believed to be a good predictor of improved OS; and | |
| ● | Analysis of peritoneal fluid by cell sorting, not reported before, shows a treatment-related decrease in the percentage of immunosuppressive T-cell (Foxp3+), which is consistent with the reduction of Foxp3+ T-cells in the primary tumor tissue, and a shift in tumor naïve CD8+ cell population to more efficient tumor killing memory effector CD8+ cells. |
The Company also reported positive clinical data from the first fourteen patients who completed treatment in the OVATION I Study. GEN-1 plus standard chemotherapy produced no dose limiting toxicities and positive dose dependent efficacy signals which correlate well with positive surgical outcomes as summarized below:
| ● | Of the fourteen patients treated in the entire study, two patients demonstrated a complete response, ten patients demonstrated a partial response and two patients demonstrated stable disease, as measured by RECIST criteria. This translates to a 100% disease control rate and an 86% objective response rate (“ORR”). Of the five patients treated in the highest dose cohort, there was a 100% ORR with one complete response and four partial responses; | |
| ● | Fourteen patients had successful resections of their tumors, with nine patients (64%) having a complete tumor resection (“R0”), which indicates a microscopically margin-negative resection in which no gross or microscopic tumor remains in the tumor bed. Seven out of eight (88%) patients in the highest two dose cohorts experienced a R0 surgical resection. All five patients treated at the highest dose cohort experienced a R0 surgical resection; and | |
| ● | All patients experienced a clinically significant decrease in their CA-125 protein levels as of their most recent study visit. CA-125 is used to monitor certain cancers during and after treatment. CA-125 is present in greater concentrations in ovarian cancer cells than in other cells. |
On March 2, 2019, the Company announced final progression free survival (“PFS”) results from the OVATION I Study. Median PFS in patients treated per protocol (n=14) was 21 months and was 17.1 months for the intent-to-treat (“ITT”) population (n=18) for all dose cohorts, including three patients who dropped out of the study after 13 days or less, and two patients who did not receive full NAC and GEN-1 cycles. Under the current standard of care, in women with Stage III/IV ovarian cancer undergoing NAC, their disease progresses within about 12 months on average. The results from the OVATION I Study support continued evaluation of GEN-1 based on promising tumor response, as reported in the PFS data, and the ability for surgeons to completely remove visible tumor at interval debulking surgery. GEN-1 was well tolerated, and no dose-limiting toxicities were detected. Intraperitoneal administration of GEN-1 was feasible with broad patient acceptance.
OVATION 2 Study. The Company held an Advisory Board Meeting on September 27, 2017 with the clinical investigators and scientific experts including those from Roswell Park Cancer Institute, Vanderbilt University Medical School, and M.D. Anderson Cancer Center to review and finalize clinical, translational research and safety data from the OVATION I Study in order to determine the next steps forward for our GEN-1 immunotherapy program.
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On November 13, 2017, the Company filed its Phase I/II clinical trial protocol with the FDA for GEN-1 for the localized treatment of ovarian cancer. The protocol is designed with a single dose escalation phase to 100 mg/m² to identify a safe and tolerable dose of GEN-1 while maximizing an immune response. The Phase I portion of the study will be followed by a continuation at the selected dose in approximately 110 patients randomized Phase II study.
In the OVATION 2 Study, patients in the GEN-1 treatment arm will receive GEN-1 plus chemotherapy pre- and post-interval debulking surgery (“IDS”). The OVATION 2 Study will include up to 110 patients with Stage III/IV ovarian cancer, with 12 to 15 patients in the Phase I portion and up to 95 patients in Phase II. The study is powered to show a 33% improvement in the primary endpoint, PFS, when comparing GEN-1 with neoadjuvant + adjuvant chemotherapy versus neoadjuvant + adjuvant chemotherapy alone. The PFS primary analysis will be conducted after at least 80 events have been observed or after all patients have been followed for at least 16 months, whichever is later.
In March 2020, the Company announced encouraging initial clinical data from the first 15 patients enrolled in the Phase I portion of the OVATION 2 Study for patients newly diagnosed with Stage III and IV ovarian cancer. The OVATION 2 Study combines GEN-1, the Company’s IL-12 gene-mediated immunotherapy, with standard-of-care neoadjuvant chemotherapy (NACT). Following NACT, patients undergo interval debulking surgery (IDS), followed by three additional cycles of chemotherapy.
GEN-1 plus standard NACT produced positive dose-dependent efficacy results, with no dose-limiting toxicities, which correlates well with successful surgical outcomes as summarized below:
| ● | Of the 15 patients treated in the Phase I portion of the OVATION 2 Study, nine patients were treated with GEN-1 at a dose of 100 mg/m² plus NACT and six patients were treated with NACT only. All 15 patients had successful resections of their tumors, with eight out of nine patients (88%) in the GEN-1 treatment arm having an R0 resection, which indicates a microscopically margin-negative complete resection in which no gross or microscopic tumor remains in the tumor bed. Only three out of six patients (50%) in the NACT only treatment arm had a R0 resection. |
| ● | When combining these results with the surgical resection rates observed in the Company’s prior Phase Ib dose-escalation trial (the OVATION 1 Study), a population of patients with inclusion criteria identical to the OVATION 2 Study, the data reflect the strong dose-dependent efficacy of adding GEN-1 to the current standard of care NACT: |
| %
of Patients with R0 Resections | ||||||
| 0, 36, 47 mg/m² of GEN-1 plus NACT | n=12 | 42 | % | |||
| 61, 79, 100 mg/m² of GEN-1 plus NACT | n=17 | 82 | % | |||
| ● | The ORR as measured by Response Evaluation Criteria in Solid Tumors (RECIST) criteria for the 0, 36, 47 mg/m² dose GEN-1 patients were comparable, as expected, to the higher (61, 79, 100 mg/m²) dose GEN-1 patients, with both groups demonstrating an approximate 80% ORR. |
On March 23, 2020, the Company announced that the European Medicines Agency (the “EMA”) Committee for Orphan Medicinal Products (“COMP”) has recommended that GEN-1 be designated as an orphan medicinal product for the treatment of ovarian cancer. GEN-1 is an IL-12 DNA plasmid vector encased in a non-viral nanoparticle delivery system, which enables cell transfection followed by persistent, local secretion of the IL-12 protein. GEN-1 previously received orphan designation from the FDA.
On March 26, 2020, the Company announced with Medidata, a Dassault Systèmes company, that examining matched patient data provided by Medidata in a synthetic control arm (“SCA”) with results from the Company’s completed Phase Ib dose-escalating OVATION I Study showed positive results in progression-free survival (“PFS”). The hazard ratio (“HR”) was 0.53 in the ITT group, showing strong signals of efficacy. Celsion believes these data may warrant consideration of strategies to accelerate the clinical development program for GEN-1 in newly diagnosed, advanced ovarian cancer patients by the FDA. In its March 2019 discussion with Celsion, the FDA noted that preliminary findings from the Phase Ib OVATION I Study were exciting but lacked a control group to evaluate GEN-1’s independent impact on impressive tumor response, surgical results and PFS. The FDA encouraged the Company to continue its GEN-1 development program and consult with FDA with new findings that may have a bearing on designations such as Fast Track and Breakthrough Therapy.
SCAs have the potential to revolutionize clinical trials in certain oncology indications and some other diseases where a randomized control is not ethical or practical. SCAs are formed by carefully selecting control patients from historical clinical trials to match the demographic and disease characteristics of the patients treated with the new investigational product. SCAs have been shown to mimic the results of traditional randomized controls so that the treatment effects of an investigational product can be visible by comparison to the SCA. SCAs can help advance the scientific validity of single arm trials, and in certain indications, reduce time and cost, and expose fewer patients to placebos or existing standard-of-care treatments that might not be effective for them.
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On July 27, 2020, the Company announced the randomization of the first two patients in the Phase II portion of the OVATION 2 Study with GEN-1 in advanced ovarian cancer. The Company anticipates completing enrollment of up to 110 patients in the second half of 2021. Because this is an open-label study, the Company intends to provide clinical updates throughout the course of treatment including response rates and surgical resection scores.
In February 2021, the Company announced that it has received Fast Track designation from the FDA for GEN-1, its DNA-mediated IL-12 immunotherapy currently in Phase II development for the treatment of advanced ovarian cancer and also provided an update on the OVATION 2 Study. The Company reported that approximately one-third, or 34 patients, of the anticipated 110 patients had been enrolled into the OVATION 2 Study, of which 20 are in the treatment arm and 14 are in the control. Currently, 27 patients have had their interval debulking surgery with the following results:
| ● | 12 of 15, or 80%, of patients treated with GEN-1 had a R0 resection, which indicates a microscopically margin-negative complete resection in which no gross or microscopic tumor remains in the tumor bed. | |
| ● | 7 of 12 patients, or 58%, of patients in the control arm had an R0 resection. | |
| ● | This interim data represents a 38% improvement in R0 resection rates for GEN-1 patients compared with control arm patients and is consistent with the reported improvement in resection scores noted in the encouraging Phase I OVATION I Study, the manuscript of which has been submitted for peer review publication. |
The Company further reported that 22 clinical sites in the U.S. and Canada have been initiated, with three more sites expected to be added by the end of the first quarter. Clinical investigators met in early February 2021 in a virtual meeting and expressed excitement about the potential for GEN-1 to treat advanced ovarian cancer and, despite the challenges and earlier delays posed by the COVID-19 pandemic, they remain committed to completing enrollment in the study during the second half of 2021.
PLACCINE DNA VACCINE TECHNOLOGY PLATFORM
In January 2021, the Company announced the filing of a provisional U.S. patent application for a novel DNA-based, investigational vaccine for preventing or treating infections from a broad range of infectious agents including the coronavirus disease using its PLACCINE DNA vaccine technology platform (“PLACCINE”). The provisional patent covers a family of novel composition of multi-cistronic vectors and polymeric nanoparticles that comprise the PLACCINE DNA vaccine platform technology for preventing or treating infectious agents that have the potential for global pandemics, including the SARS-CoV-2 virus and its variations, using the Company’s platform technology.
Celsion’s PLACCINE DNA vaccine technology platform is characterized by a single multi-cistronic DNA plasmid vector expressing multiple pathogen antigens along with a potent immune modifier and delivered with a synthetic delivery system. It is easily adaptable to creating vaccines for a multitude of pathogens, including emerging pathogens leading to pandemics as well as infectious diseases that have yet to be effectively addressed with current vaccine technologies. This flexible vaccine platform is well supported by an already established supply chain to produce any plasmid vector and its assembly into a respective vaccine formulation.
PLACCINE is an extension of the Company’s synthetic, non-viral TheraPlas delivery technology currently in a Phase II trial for the treatment of late-stage ovarian cancer with GEN-1. Celsion’s proprietary multifunctional DNA vaccine technology concept is built on the flexible PLACCINE technology platform that is amenable to rapidly responding to the SARS-CoV-2 virus, as well as possible future mutations of SARS-CoV-2, other future pandemics, emerging bioterrorism threats, and novel infectious diseases. Celsion’s extensive experience with TheraPlas suggests that the PLACCINE-based nanoparticles are stable at storage temperatures of 4oC to 25oC, making vaccines developed on this platform easily suitable for broad world-wide distribution.
Celsion’s vaccine approach is designed to optimize the quality of the immune response dictating the efficiency of pathogen clearance and patient recovery. Celsion has taken a multivalent approach in an effort to generate an even more robust immune response that not only results in a strong neutralizing antibody response, but also a more robust and durable T-cell response. Delivered with Celsion’s synthetic polymeric system, the proprietary DNA plasmid is protected from degradation and its cellular uptake is facilitated.
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COVID-19 Vaccine Overview
Emerging data from the recent literature indicates that the quality of the immune response as opposed to its absolute magnitude is what dictates SARS-CoV-2 viral clearance and recovery and that an ineffective or non-neutralizing enhanced antibody response might actually exacerbate disease. The first-generation COVID-19 vaccines were developed for rapid production and deployment and were not optimized for generating cellular responses that result in effective viral clearance. Though early data has indicated some of these vaccines to be over 95% effective, these first-generation vaccines were primarily designed to generate a strong antibody response and, while they have been shown to provide prophylactic protection against disease, the durability of this protection is currently unclear. The vast majority of these vaccines have been specifically developed to target the SARS-CoV-2 Spike (S) protein (antigen), though it is known that restricting a vaccine to a sole viral antigen creates selection pressure that can serve to facilitate the emergence of viral resistance. Indeed, even prior to full vaccine rollout, it has been observed that the S protein is a locus for rapid evolutionary and functional change as evidenced by the D614G, Y453F, 501Y.V2, and VUI-202012/01 mutations/deletions. This propensity for mutation of the S protein leads to future risk of efficacy reduction over time as these mutations accumulate.
Our Next Generation Vaccine Initiative
Celsion’s next generation vaccine initiative stands at the confluence of immunotherapy and immunogenicity and envisions delivery, on a single plasmid, multiple SARS-CoV-2 antigens in conjunction with a potent immune modifier, interleukin-12 (IL-12), which directs a TH-1 immune response, stimulates T-cell immunity, and also promises the promotion of humoral immunity (antibody response). While most COVID-19 vaccines in late-stage clinical development are monovalent (S protein antigen only), Celsion has taken this multivalent approach in an effort to generate an even more robust immune response that not only results in a strong neutralizing antibody response, but also a more robust and durable T-cell response.
Celsion’s vaccine candidate approach comprises a single plasmid vector containing the DNA sequence encoding the cytokine IL-12 and multiple SARS-CoV-2 antigens, including S antigen in combination with the membrane (M) or nucleocapsid (N) antigen. Delivery will be evaluated intramuscularly, intradermally, or subcutaneously with a non-viral synthetic DNA delivery carrier that facilitates vector delivery into the cells of the injected tissue and has potential immune adjuvant properties. Unique designs and formulations of Celsion vaccine candidates may offer several potential key advantages.
| ● | While the antibodies against S antigen would prevent virus entry into cells, the M and N antibodies could help virus clearance through antibody-mediated opsonization and phagocytosis. The presentation of multiple antigens on the cell surface of vaccine-injected tissue produces a broad variety of killer T-cells which could potentially produce more efficient viral clearance than a single antigen vaccine. | |
| ● | Since IL-12 is an essential regulator of the differentiation, proliferation, and maintenance of T helper 1 (TH-1) cells that generate killer T-cells and memory T-cells against virally infected cells, its simultaneous expression could boost the viral clearance by the vaccine and improve the immune system’s memory against any future exposure of the same virus. | |
| ● | Finally, the synthetic polymeric DNA carrier is an important component of the vaccine composition as it has the potential to facilitate the vaccine immunogenicity by improving vector delivery and, due to potential adjuvant properties, attract professional immune cells to the site of vaccine delivery. |
Future vaccine technology will need to address viral mutations and the challenges of efficient manufacturing, distribution, and storage. We believe an adaptation of our TheraPlas technology, PLACCINE, has the potential to meet these challenges. Our approach is described in our provisional patent filing and is summarized as a DNA vaccine technology platform characterized by a single plasmid DNA with multiple coding regions. The plasmid vector is designed to express multiple pathogen antigens along with a potent immune modifier. It is delivered via a synthetic delivery system and has the potential to be easily modified to create vaccines against a multitude of infectious diseases, addressing:
| ● | Viral Mutations: PLACCINE may offer broad-spectrum and mutational resistance (variants) by targeting multiple antigens on a single plasmid vector. | |
| ● | Enhanced Efficacy: The potent immune modifier IL-12 may improve humoral and cellular responses to viral antigens and can be incorporated in the plasmid. | |
| ● | Durable Efficacy: PLACCINE delivers a DNA plasmid-based antigen that can result in durable antigen exposure and a robust vaccine response to viral antigens. | |
| ● | Storage & Distribution: PLACCINE allows for stability that is compatible with manageable vaccine storage and distribution. | |
| ● | Simple Dosing & Administration: PLACCINE is a synthetic delivery system that should require a simple injection that does not require viruses or special equipment to deliver its payload. |
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We are conducting preliminary research associated with our recently announced proprietary DNA vaccine platform provisional patent filing. At the same time, we are redoubling our efforts and R&D resources in our immuno-oncology and next generation vaccine program.
THERMODOX® - DIRECTED CHEMOTHERAPY
Liposomes are manufactured submicroscopic vesicles consisting of a discrete aqueous central compartment surrounded by a membrane bilayer composed of naturally occurring lipids. Conventional liposomes have been designed and manufactured to carry drugs and increase residence time, thus allowing the drugs to remain in the bloodstream for extended periods of time before they are removed from the body. However, the current existing liposomal formulations of cancer drugs and liposomal cancer drugs under development do not provide for the immediate release of the drug and the direct targeting of organ specific tumors, two important characteristics that are required for improving the efficacy of cancer drugs such as doxorubicin. A team of research scientists at Duke University developed a heat-sensitive liposome that rapidly changes its structure when heated to a threshold minimum temperature of 39.5º to 42º Celsius. Heating creates channels in the liposome bilayer that allow an encapsulated drug to rapidly disperse into the surrounding tissue. This novel, heat-activated liposomal technology is differentiated from other liposomes through its unique low heat-activated release of encapsulated chemotherapeutic agents. We are able to use several available focused-heat technologies, such as radiofrequency ablation (“RFA”), microwave energy and high intensity focused ultrasound (“HIFU”), to activate the release of drugs from our novel heat sensitive liposomes.
THERMODOX® for the Treatment of Primary Liver Cancer
Primary Liver Cancer Overview
Hepatocellular carcinoma (“HCC”) is one of the most common and deadliest forms of cancer worldwide. It ranks as the third most common solid tumor cancer. It is estimated that up to 90% of liver cancer patients will die within five years of diagnosis. The incidence of primary liver cancer is approximately 35,000 cases per year in the U.S., approximately 65,000 cases per year in Europe and is increasing at approximately 2-3% per year worldwide. Global incidence (per 2017 GLOBALCAN statistics) is reported at 755,000 cases. The World Health Organization (the “WHO”) has projected that HCC will be the most prevalent form of cancer by 2030. HCC is commonly diagnosed in patients with longstanding hepatic disease and cirrhosis (primarily due to hepatitis C in the U.S., Japan and Europe and hepatitis B in Asia).
At an early stage, the standard first line treatment for liver cancer is surgical resection of the tumor. Up to 80% of patients are ineligible for surgery or transplantation at time of diagnosis because early-stage liver cancer generally has few symptoms and when finally detected the tumor frequently is too large for surgical resection. There are few alternative treatments since radiation therapy and chemotherapy are largely ineffective in treating liver cancer. For tumors generally up to 5 centimeters in diameter, RFA has emerged as the standard of care treatment which directly destroys the tumor tissue through the application of high temperatures administered by a probe inserted into the core of the tumor. Local recurrence rates after RFA directly correlate to the size of the tumor. For tumors 3 cm or smaller in diameter the recurrence rate has been reported to be 10 – 20%; however, for tumors greater than 3 cm, local recurrence rates of 40% or higher have been observed.
Celsion’s Approach
While RFA uses extremely high temperatures (greater than 90° Celsius) to ablate the tumor, it may fail to treat micro-metastases in the outer margins of the ablation zone because temperatures in the periphery may not be high enough to destroy cancer cells. Our ThermoDox® treatment approach is designed to utilize the ability of RFA devices to ablate the center of the tumor while simultaneously thermally activating our ThermoDox® liposome to release its encapsulated doxorubicin to kill any remaining viable cancer cells throughout the heated region, including the ablation margins. This novel treatment approach is intended to deliver the drug directly to those cancer cells that survive RFA. This approach is designed to increase the delivery of the doxorubicin at the desired tumor site while potentially reducing drug exposure distant to the tumor site.
OPTIMA Study
The OPTIMA Study represents an evaluation of ThermoDox® in combination with a first line therapy, RFA, for newly diagnosed, intermediate stage HCC patients. The OPTIMA Study was designed to enroll up to 550 patients globally at approximately 65 clinical sites in the U.S., Canada, European Union (EU), China and other countries in the Asia-Pacific region and will evaluate ThermoDox® in combination with standardized RFA, which will require a minimum of 45 minutes across all investigators and clinical sites for treating lesions three to seven centimeters, versus standardized RFA alone. The primary endpoint for the OPTIMA Study is OS, and the secondary endpoints are progression free survival and safety. The statistical plan calls for two interim efficacy analyses by an independent Data Monitoring Committee (“DMC”).
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On February 24, 2014, we announced that the FDA provided clearance for the OPTIMA Study, which is a pivotal, double-blind, placebo-controlled Phase III trial of ThermoDox®, in combination with standardized RFA, for the treatment of primary liver cancer. The trial design of the OPTIMA Study is based on the comprehensive analysis of data from an earlier Phase III clinical trial called the HEAT Study (the “HEAT Study”). The OPTIMA Study is supported by a hypothesis developed from an OS analysis of a large subgroup of patients from the HEAT Study.
Post-hoc data analysis from our earlier Phase III HEAT Study suggests that ThermoDox® may substantially improve OS, when compared to the control group, in patients if their lesions undergo a 45-minute RFA procedure standardized for a lesion greater than 3 cm in diameter. Data from nine OS sweeps have been conducted since the top line progression free survival PFS data from the HEAT Study were announced in January 2013, with each data set demonstrating substantial improvement in clinical benefit over the control group with statistical significance. On August 15, 2016, we announced updated results from its final retrospective OS analysis of the data from the HEAT Study. These results demonstrated that in a large, well bounded, subgroup of patients with a single lesion (n=285, 41% of the HEAT Study patients), treatment with a combination of ThermoDox® and optimized RFA provided an average 54% risk improvement in OS compared to optimized RFA alone. The HR at this analysis is 0.65 (95% CI 0.45 - 0.94) with a p-value of 0.02. Median OS for the ThermoDox® group has been reached which translates into a two-year survival benefit over the optimized RFA group (projected to be greater than 80 months for the ThermoDox® plus optimized RFA group compared to less than 60 months projection for the optimized RFA only group). This information should be viewed with caution since it is based on a retrospective analysis of a subgroup.
We also conducted additional analyses that further strengthen the evidence for the HEAT Study subgroup.
| ● | We commissioned an independent computational model at the University of South Carolina Medical School. The results unequivocally indicate that longer RFA heating times correlate with significant increases in doxorubicin concentration around the RFA treated tissue. | |
| ● | In addition, we conducted a prospective preclinical study in 22 pigs using two different manufacturers of RFA and human equivalent doses of ThermoDox® that clearly support the relationship between increased heating duration and doxorubicin concentrations. |
On August 13, 2019, the Company announced that results from an independent analysis of the Company’s ThermoDox® HEAT Study conducted by the National Institutes of Health (NIH) were published in the peer-reviewed publication, Journal of Vascular and Interventional Radiology. The analysis was conducted by the intramural research program of the NIH and the NIH Center for Interventional Oncology, with the full data set from the Company’s HEAT Study. The analysis evaluated the full data set to determine if there was a correlation between baseline tumor volume and RFA heating time (minutes/tumor volume in milliliters), with or without ThermoDox® treatment, for patients with HCC. The NIH analysis was conducted under the direction of Dr. Bradford Wood, MD, Director, NIH Center for Interventional Oncology and Chief, NIH Clinical Center Interventional Radiology.
The article titled, “RFA Duration Per Tumor Volume May Correlate with Overall Survival in Solitary Hepatocellular Carcinoma Patients Treated with RFA Plus Lyso-thermosensitive Liposomal Doxorubicin,” discussed the NIH analysis of results from 437 patients in the HEAT Study (all patients with a single lesion representing 62.4% of the study population). The key finding was that increased RFA heating time per tumor volume significantly improved OS in patients with single-lesion HCC who were treated with RFA plus ThermoDox®, compared to patients treated with RFA alone. A one-unit increase in RFA duration per tumor volume was shown to result in about a 20% improvement in OS for patients administered ThermoDox®, compared to RFA alone. The authors conclude that increasing RFA heating time in combination with ThermoDox® significantly improves OS and establishes an improvement of over two years versus the control arm when the heating time per milliliter of tumor is greater than 2.5 minutes. This finding was consistent with the Company’s own results, which defined the optimized RFA procedure as a 45-minute treatment for tumors with a diameter of 3 centimeters. Thus, the NIH analysis lent support to the hypothesis underpinning the OPTIMA Study.
In August 2018, the Company announced that the OPTIMA Study was fully enrolled. On August 5, 2019, the Company announced that the prescribed number of OS events had been reached for the first prespecified interim analysis of the OPTIMA Phase III Study. Following preparation of the data, the first interim analysis was conducted by the DMC. The DMC’s pre-planned interim efficacy review followed 128 patient events, or deaths, which occurred in August 2019. On November 4, 2019, the Company announced that the DMC unanimously recommended the OPTIMA Study continue according to protocol. The recommendation was based on a review of blinded safety and data integrity from 556 patients enrolled in the OPTIMA Study. Data presented demonstrated that PFS and OS data appeared to be tracking with patient data observed at a similar point in the Company’s subgroup of patients followed prospectively in the earlier Phase III HEAT Study, upon which the OPTIMA Study was based.
On April 15, 2020, the Company announced that the prescribed minimum number of events of 158 patient deaths had been reached for the second pre-specified interim analysis of the OPTIMA Phase III Study. The hazard ratio for success at 158 deaths is 0.70, which represents a 30% reduction in the risk of death compared with RFA alone. On July 13, 2020, the Company announced that it has received a recommendation from the DMC to consider stopping the global OPTIMA Study. The recommendation was made following the second pre-planned interim safety and efficacy analysis by the DMC on July 9, 2020. The DMC analysis found that the pre-specified boundary for stopping the trial for futility of 0.900 was crossed with an actual value of 0.903. However, the 2-sided p-value of 0.524 for this analysis provides uncertainty, subsequently, the DMC left the final decision of whether or not to stop the OPTIMA Study to Celsion. There were no safety concerns noted during the interim analysis. The Company followed the advice of the DMC considered its options either to stop the study or continue to follow patients after a thorough review of the data, and an evaluation of our probability of success.
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On August 4, 2020, the Company issued a press release announcing it would continue following patients for OS, noting that the unexpected and marginally crossed futility boundary, suggested by the Kaplan-Meier analysis at the second interim analysis on July 9, 2020, may be associated with a data maturity issue. On October 12, 2020, the Company provided an update on the ongoing data analysis from its Phase III OPTIMA Study with ThermoDox® as well as growing interest among clinical investigators in conducting studies with ThermoDox® as a monotherapy or in combination with other therapies.
| ● | Celsion engaged a global biometrics contract research organization, with forensic statistical analysis capability that specializes in data management, statistical consulting, statistical analysis and data sciences, with particular expertise in evaluating unusual data from clinical trials and experience with associated regulatory issues. The primary objective of the CRO’s work was to determine the basis and reasoning behind continuing to follow patients for survival, and if there were outside influences that may have impacted the forecast of futility. |
| ● | In parallel, the Company submitted all OPTIMA Study clinical trial data to the National Institutes of Health (NIH) and with the expectation of receiving a report on the following: |
| ○ | A Cox Regression Analysis for single solitary lesions including minimum burn time per tumor volume, evaluating similarities to the hypothesis generated from the NIH paper published in the Journal of Vascular and Interventional Radiology, in which the key finding was that increased RFA heating time per tumor volume significantly improved OS in patients with single lesion HCC who were treated with RFA plus ThermoDox®, compared with patients treated with RFA alone. | |||
| ○ | A site-by-site evaluation for RFA heating time-based anomalies that may have contributed to the treatment arm performance. | |||
| ○ | An image-based evaluation comparing results from the OPTIMA Study to the data from the HEAT Study that led to the RFA heating time hypothesis. |
On February 11, 2021, the Company provided a final update on the Phase III OPTIMA Study and the decision to stop following patients in the Study. Independent analyses conducted by a global biometrics contract research organization and the NIH, did not find any evidence of significance or factors that would justify continuing to follow patients for OS. Therefore, the Company notified all clinical sites to discontinue following patients. The OPTIMA Study database of 556 patients will now be frozen at 185 patient deaths. While the analyses did identify certain patient subgroups that appear to have had a clinical benefit, the Company concluded that it would not be in its best interest to pursue these retrospective findings as the regulatory hurdles supporting further discussion will be significant.
Investigator-Sponsored Studies with ThermoDox®
Celsion continues working closely and supporting investigations by others throughout the world in breast cancer, pancreatic cancer and in solid tumors in children. Following inquiries from the NIH, we intend to renew our Cooperative Research and Development Agreement (CRADA) with the Institute at a nominal cost, one goal of which is to pursue their interest in a study of ThermoDox® to treat patients with bladder cancer. Importantly, Celsion is developing a business model to support these investigator-sponsored studies in a manner that will not interfere with the Company’s focus on our GEN-1 program and vaccine development initiative.
Below are summaries of several investigator-sponsored studies using ThermoDox®:
| ● | Oxford University commenced enrolling patients in a Phase I pancreatic cancer study with ThermoDox® in combination with High Intensity Focused Ultrasound (HIFU) in July of 2021. The primary objective of this trial, the PanDox Study: Targeted Doxorubicin in Pancreatic Tumors, is to quantify the enhancement in intratumoral doxorubicin concentration when delivered with ThermoDox® and HIFU, versus doxorubicin monotherapy. This study is being undertaken pursuant to promising data in a mouse model of pancreatic cancer, which was published in the International Journal of Hyperthermia in 2018. That preclinical study showed a 23x increase in intratumoral doxorubicin concentration with ThermoDox® + HIFU, compared with a 2x increase in intratumoral doxorubicin concentration with free doxorubicin plus HIFU. | |
| ● | Utrecht University in the Netherlands continues to enroll patients in a Phase I breast cancer study to determine the safety, tolerability and feasibility of ThermoDox® in combination with Magnetic Resonance Guided High Intensity Focused Ultrasound (MR-HIFU) hyperthermia and cyclophosphamide therapy for the local treatment of the primary tumor in metastatic breast cancer (mBC). This investigator-sponsored study, which is being funded by the Dutch Cancer Society, the Center for Translational Molecular Medicine (a public-private partnership in the Netherlands), will be conducted at University Medical Center Utrecht and will enroll up to 12 newly diagnosed mBC patients. Celsion will supply Thermodox® clinical product for the trial. | |
| ● | As evidence of the ongoing support Celsion enjoys from the NIH, they have organized a clinical project to evaluate ThermoDox® plus the chemotherapy drug mitomycin in bladder cancer. Depending on the NIH timelines, this study may commence as early as 2021. |
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Business Plan
Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s product candidates, and applications and submissions to the U.S. Food and Drug Administration. The Company has not generated significant revenue and has incurred significant net losses in each year since our inception. As of June 30, 2021, the Company has incurred approximately $323 million of cumulative net losses and we had approximately $64.5 million in cash and cash equivalents, restricted cash, short-term investments, and receivable on sale of net operating losses. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.
The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its product candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The operating results of the Company have fluctuated significantly in the past.
In January 2020, the WHO declared an outbreak of coronavirus, COVID-19, to be a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. This virus has spread to over 100 countries, including the U.S. Governments and businesses around the world undertook unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that has prohibited many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations during 2020 and thus far in 2021 due to COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.
The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19 pandemic. The disruptions caused by COVID-19 may also disrupt the clinical trials process and enrolment of patients. This may delay commercialization efforts. The Company continues to monitor its operating activities in light of these events. The specific impact, if any, is not readily determinable as of the date of these financial statements.
The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the following:
| ● | the progress of research activities; |
| ● | the number and scope of research programs; |
| ● | the progress of preclinical and clinical development activities; |
| ● | the progress of the development efforts of parties with whom the Company has entered into research and development agreements; |
| ● | the costs associated with additional clinical trials of product candidates; |
| ● | the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements; |
| ● | the ability to achieve milestones under licensing arrangements; |
| ● | the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and |
| ● | the costs and timing of regulatory approvals. |
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On July 13, 2020As discussed earlier in this Quarterly Report on Form 10Q, the Company announced that it has received a recommendation from the independent DMC to consider stopping the global Phase III OPTIMA Study of ThermoDox® in combination with RFA for the treatment of HCC, or primary liver cancer on July 13, 2020. On February 11, 2021, the Company issued a letter to shareholders stating that the Company was notifying all clinical sites to discontinue following patients in the OPTIMA Study.
During 2020, 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. In 2018 and 2019, the Company sold NOLs totaling $13 million receiving net proceeds of $12.2 million. In June 2020 and as updated in September 2020, the Company filed an application with the New Jersey Economic Development Authority to sell substantially all of its remaining State of New Jersey net operating losses totaling $2.0 million available under the program. On February 12, 2021, the New Jersey Economic Development Authority approved the full amount of the Company’s application. In February of 2021, the Company entered into an agreement to sell the net operating losses from the 2020 application and the Company received net proceeds of approximately $1.85 million on May 10, 2021. During 2021, the New Jersey State Legislature increased the maximum lifetime benefit per company from $15 million to $20 million, which will allow the Company to participate in this innovative funding program in future years (see additional disclosure on next page).
In June 2018, the Company entered into a Credit Agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in capital (the “Horizon Credit Agreement”). The obligations under the Horizon Credit Agreement are secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. Payments under the loan agreement are interest only (calculated based on one-month LIBOR plus 7.625%) for the first 24 months through July 2020, followed by a 21-month amortization period of principal and interest starting on August 1, 2020 and ending through the scheduled maturity date on April 1, 2023. On August 28, 2020, in connection with an Amendment to the Horizon Credit Agreement, Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured as more fully discussed in Note 11 to the financial statements As more fully discussed in Note 11, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipelines. The funding is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate (currently 3.25%).
Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.
As more fully discussed in Note 12, during 2021 through the date of the filing of this Quarterly Report on Form 10-Q, the Company raised approximately $6.9 million in gross proceeds from the use of its JonesTrading Capital on DemandTM financing facility, $35 million from a registered direct financing completed in January 2021, $15 million from a registered direct financing completed in April 2021, and $1.5 million from warrant exercises. With $64.5 million in cash and cash equivalents, restricted cash, short-term investments and interest receivable at June 30, 2021, the Company believes it has sufficient capital resources to fund its operations through the end of 2024.
The Company has based its estimates on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s State of New Jersey net operating losses and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.
Financing Overview
Equity, Debt and Other Forms of Financing
During 2020, 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. In 2018 and 2019, the Company sold NOLs totaling $13 million receiving net proceeds of $12.2 million. In June 2020 and as updated in September 2020, the Company filed an application with the New Jersey Economic Development Authority to sell substantially all of its remaining State of New Jersey net operating losses totaling $2.0 million available under the program. On February 12, 2021, the New Jersey Economic Development Authority approved the full amount of the Company’s application. In February of 2021, the Company entered into an agreement to sell the net operating losses from the 2020 application and the Company received net proceeds of approximately $1.85 million on May 10, 2021. During 2021, the New Jersey State Legislature increased the maximum lifetime benefit per company from $15 million to $20 million, which will allow the Company to participate in this innovative funding program in future years. On June 16, 2021, the Company filed another application to sell approximately $1.6 million of net operating losses during 2021 and expects to receive up to approximately $1.4 million under the current year program.
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As previously discussed, the Company entered into a Credit Agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in capital (the “Horizon Credit Agreement”) in June 2018. In August, 2020, in connection with an Amendment to the Horizon Credit Agreement, Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured. In June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing. Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.
In September 2018, the Company filed with the SEC a $75 million shelf registration statement on Form S-3 (the 2018 Shelf Registration Statement) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on October 12, 2018 and was fully utilized by the end of January 2021.
On March 19, 2021, the Company filed with the SEC a new $100 million shelf registration statement on Form S-3 (File No. 333-254515) (the “2021 Registration Statement”) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on March 30, 2021.
During 2020 and 2021 through the date of this Quarterly Report filed on Form 10-Q, we issued a total of 62.5 million shares of common stock as discussed below for an aggregate $83.2 million in gross proceeds.
| ● | On December 4, 2018, the Company entered into the Capital on Demand Agreement with JonesTrading, pursuant to which the Company may offer and sell, from time to time, through JonesTrading shares of Common Stock having an aggregate offering price of up to $16.0 million. During 2019, the Company sold and issued an aggregate of 0.5 million shares under the Capital on Demand Agreement, receiving approximately $1.0 million in gross proceeds. During 2020, the Company sold and issued an aggregate of 5.2 million shares under the Capital on Demand Agreement, receiving approximately $6.2 million in gross proceeds. During 2021 through the date of this Quarterly Report on Form 10-Q, the Company sold 7.2 million shares under the Capital on Demand Agreement, receiving approximately $6.9 million in gross proceeds under the Capital on Demand Agreement. | |
| ● | On February 27, 2020, we entered into a Securities Purchase Agreement (the “February 2020 Purchase Agreement”) with several institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering (the “February 2020 Offering”), an aggregate of 4,571,428 shares of our common stock at an offering price of $1.05 per share for gross proceeds of approximately $4.8 million before the deduction of the Placement Agent fees and offering expenses. In a concurrent private placement (the “Private Placement”), the Company issued to the investors that participated in the February 2020 Offering, for no additional consideration, warrants, to purchase up to 2,971,428 shares of common stock (the “Original Warrants”). The Original Warrants were initially exercisable six months following their date of issue and were set to expire on the five-year anniversary of such initial exercise date. The Original Warrants had an exercise price of $1.15 per share subject to adjustment as provided therein. On March 12, 2020, the Company entered into private exchange agreements (the “Exchange Agreements”) with holders of the Original Warrants. Pursuant to the Exchange Agreements, in return for a higher exercise price of $1.24 per share of common stock, the Company issued new warrants to the Investors to purchase up to 3,200,000 shares of common stock (the “Exchange Warrants”) in exchange for the Original Warrants. The Exchange Warrants, like the Original Warrants, are initially exercisable six months following their issuance (the “Initial Exercise Date”) and expire on the five-year anniversary of their Initial Exercise Date. Other than having a higher exercise price, different issue date, Initial Exercise Date and expiration date, the terms of the Exchange Warrants are identical to those of the Original Warrants. On July 31, 2020, the Company filed a Form S-3 Registration Statement to register the shares of common stock issuable under the Exchange Warrants; the Registration Statement was declared effective by the SEC on August 13, 2020. No Exchange Warrants were exercised during 2020. During 2021 through the date of this Quarterly Report on Form 10-Q, the Company issued 1.2 million shares pursuant to investors exercising Exchange Warrants, receiving approximately $1.5 million. |
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| ● | On June 22, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co. Inc. (the “Underwriter”), relating to the issuance and sale (the “Underwritten Offering”) of 2,666,667 shares of the Company’s common stock. Pursuant to the terms of the Underwriting Agreement, the Underwriter agreed to purchase the shares at a price of $3.4875 per share. The Underwriter offered the shares at a public offering price of $3.75 per share, reflecting an underwriting discount equal to $0.2625, or 7.0% of the public offering price. The net proceeds to the Company from the Underwritten Offering, after deducting the underwriting discount and estimated offering expenses payable by the Company, were approximately $9.1 million. | |
| ● | On September 8, 2020, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right to sell to Lincoln Park up to $26.0 million of shares of the Company’s Common Stock at the Company’s discretion as described below (the “LPC Offering”). During 2020, the Company sold and issued an aggregate of 3.3 million shares, including the LPC Commitment Shares, under the LPC Purchase Agreement, receiving approximately $2.2 million in gross proceeds. The Company sent a letter to Lincoln Park terminating the LPC Offering effective January 21, 2021. The Company did not sell any shares under the LPC Purchase Agreement in 2021. | |
| ● | On January 22, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “January 2021 Offering”), an aggregate of 25,925,925 shares of the Company’s common stock at an offering price of $1.35 per share for gross proceeds of approximately $35 million before the deduction of the January 2021 Placement Agents (as defined below) fee and offering expenses. The closing of the January 2021 Offering occurred on January 26, 2021. In connection with the January 2021 Offering, the Company entered into a placement agent agreement (the “January 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners (together with Brookline Capital Markets, the “January 2021 Placement Agents”) pursuant to which the Company agreed to pay the January 2021 Placement Agents a cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the January 2021 Offering and reimburse the January 2021 Placement Agents for certain of their expenses in an amount not to exceed $82,500. | |
| ● | On March 31, 2021, the Company entered into a Securities Purchase Agreement (the “March 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “March 2021 Offering”), an aggregate of 11,538,462 shares of the Company’s common stock, at an offering price of $1.30 per share for gross proceeds of approximately $15 million before the deduction of the placement agents fee and offering expenses. The shares were offered by the Company pursuant to the 2021 Registration Statement. The March 2021 Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the Offering occurred on April 5, 2021. The Company will account for the March 31, 2021 Offering in the second quarter of 2021. In connection with the March 2021 Offering, the Company entered into a placement agent agreement (the “March 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners, as lead placement agent (“AGP,” and together with JonesTrading Institutional Services LLC and Brookline Capital Markets, a division of Arcadia Securities, LLC, serving as co-placement agents, the “March 2021 Placement Agents”) pursuant to which the Company agreed to pay the March 2021 Placement Agents an aggregate cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the Offering and reimburse the Placement Agents for certain of their expenses in an amount not to exceed $82,500. |
Significant Accounting Policies
Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in our 2020 Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 19, 2021. See Note 5 to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
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As a clinical stage biopharmaceutical company, our business, and our ability to execute our strategy to achieve our corporate goals are subject to numerous risks and uncertainties. Material risks and uncertainties relating to our business and our industry are described in “Item 1A. Risk Factors” under “Part II: Other Information” included herein.
FINANCIAL REVIEW FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020
Results of Operations
For the three months ended June 30, 2021 our net loss was $5.4 million compared to a net loss of $5.3 million for the same three-month period of 2020. For the six months ended June 30, 2021 our net loss was $11.1 million compared to a net loss of $10.4 million for the same three-month period of 2020.
With $64.5 million in cash and cash equivalents, short-term investments, interest receivable and restricted cash, at June 30, 2021, coupled with approximately $15 million of potential future sales of the Company’s State of New Jersey net operating losses, the Company believes it has sufficient capital resources to fund its operations through 2024.
| Three Months Ended June 30, | ||||||||||||||||
| (In thousands) | Change Increase (Decrease) | |||||||||||||||
| 2021 | 2020 | % | ||||||||||||||
| Licensing Revenue: | $ | 125 | $ | 125 | $ | - | - | % | ||||||||
| Operating Expenses: | ||||||||||||||||
| Clinical Research | 1,210 | 1,481 | (271 | ) | (18.3 | )% | ||||||||||
| Chemistry, Manufacturing and Controls (CMC) | 1,383 | 1,510 | (127 | ) | (8.4 | )% | ||||||||||
| Research and development expenses | 2,593 | 2,991 | (398 | ) | (13.3 | )% | ||||||||||
| General and administrative expenses | 2,603 | 1,901 | 702 | 36.9 | % | |||||||||||
| Total operating expenses | 5,196 | 4,892 | 304 | 6.2 | % | |||||||||||
| Loss from operations | $ | (5,071 | ) | $ | (4,767 | ) | $ | (304 | ) | (6.4 | )% | |||||
| Six Months Ended June 30, | ||||||||||||||||
| (In thousands) | Change Increase (Decrease) | |||||||||||||||
| 2021 | 2020 | % | ||||||||||||||
| Licensing Revenue: | $ | 250 | $ | 250 | $ | - | - | % | ||||||||
| Operating Expenses: | ||||||||||||||||
| Clinical Research | 2,364 | 3,299 | (935 | ) | (28.3 | )% | ||||||||||
| Chemistry, Manufacturing and Controls (CMC) | 2,801 | 2,744 | 57 | 2.1 | % | |||||||||||
| Research and development expenses | 5,165 | 6,043 | (878 | ) | (14.5 | )% | ||||||||||
| General and administrative expenses | 5,540 | 3,740 | 1,800 | 48.1 | % | |||||||||||
| Total operating expenses | 10,705 | 9,783 | 922 | 9.4 | % | |||||||||||
| Loss from operations | $ | (10,455 | ) | $ | (9,533 | ) | $ | (922 | ) | (9.7 | )% | |||||
Comparison of the Three Months Ended June 30, 2021 and 2020
Licensing Revenue
In January 2013, we entered into a technology development contract with Hisun, pursuant to which Hisun paid us a non-refundable technology transfer fee of $5.0 million to support our development of ThermoDox® in the China territory. The $5.0 million received as a non-refundable payment from Hisun in the first quarter 2013 has been recorded to deferred revenue and will be amortized over the ten-year term of the agreement; therefore, we recorded deferred revenue of $125,000 in each of the second quarters of 2021 and 2020.
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Research and Development Expenses
Research and development (“R&D”) expenses decreased by $0.4 million to $2.6 million in the second quarter of 2021 from $3.0 million in the same period of 2020. Costs associated the OVATION 2 Study increased to $0.4 million in the second quarter of 2021 compared to $0.2 million in the same period of 2020. The Company initiated enrollment in the Phase 2 portion of the study during the third quarter of 2020. Costs associated with the OPTIMA Study decreased to $0.2 million in the second quarter of 2021 compared to $0.6 million in the same period of 2020. In July 2020, the Company unblinded the OPTIMA Study at the recommendation of the DMC to halt the study due to futility. Regulatory costs were $0.1 million in the second quarter of 2021 compared to $0.3 million in the same period of 2020. Other clinical costs were $0.4 million the second quarter of 2021 compared to $0.5 million in the same period of 2020. R&D costs associated with the development of GEN-1 to support the OVATION 2 Study as well as development of the PLACCINE DNA vaccine technology platform increased to $1.0 million in the second quarter of 2021 compared to $0.7 million in the same period of 2020. CMC costs decreased to $0.4 million in the second quarter of 2021 compared to $0.8 million in the same period of 2020.
General and Administrative Expenses
General and administrative expenses increased to $2.6 million in the second quarter of 2021 compared to $1.9 million in the same period of 2020. This increase is primarily attributable to higher non-cash stock compensation expense of approximately $0.1 million, an increase in professional fees of $0.4 million and an increase in premiums for directors’ and officers’ insurance of $0.1 million in the second quarter of 2021 when compared to the same period of 2020.
Change in Earn-out Milestone Liability and Warrant Expense
On March 28, 2019, the Company and EGWU, Inc, entered into an amendment to its purchase agreement (“Amended Asset Purchase Agreement”), whereby payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million had been modified. The Company has the option to make the payment as follows:
| a) | $7.0 million in cash within 10 business days of achieving the milestone; or |
| b) | $12.4 million in cash, common stock of the Company, or a combination of either, within one year of achieving the milestone. |
As of June 30, 2021, and March 31, 2021, the Company fair valued the earn-out milestone liability at $7.1 million and $7.1 million, respectively, and recognized a non-cash benefit of $0.1 million for the three-months ended June 30, 2021. In assessing the earnout milestone liability at June 30, 2021, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% / 50% probability for the $7.0 million and the $12.4 million payments, respectively.
As of June 30, 2020, and March 31, 2020, the Company fair valued the earn-out milestone liability at $6.1 million and $5.8 million, respectively, and recognized a non-cash charge of $0.3 million for the three-months ended June 30, 2020. In assessing the earnout milestone liability at June 30, 2020, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 80% / 20% probability for the $7.0 million and the $12.4 million payments, respectively.
Investment income and interest expense
Investment income from its short-term investments was insignificant in each of the second quarters of 2021 and 2020.
As more fully discussed in Note 11, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipelines. In connection with this Horizon Technology Financing Facility, the Company incurred $0.2 million in interest expense in the second quarter of 2021 compared to $0.3 million during the same period of 2020. In connection with the termination of the Horizon Technology Financing Facility in the second quarter of 2021, the Company paid early termination and end of term charges to Horizon and recognized $0.2 million as a loss on debt extinguishment.
Comparison of the Six Months Ended June 30, 2021 and 2020
Licensing Revenue
In January 2013, we entered a technology development contract with Hisun, pursuant to which Hisun paid us a non-refundable technology transfer fee of $5.0 million to support our development of ThermoDox® in the China territory. The $5.0 million received as a non-refundable payment from Hisun in the second quarter 2013 has been recorded to deferred revenue and will be amortized over the ten-year term of the agreement; therefore, we recorded deferred revenue of $250,000 in each of the first six months of 2021 and 2020.
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Research and Development Expenses
R&D expenses decreased by $0.9 million to $5.2 million in the first half of 2021 from $6.1 million in the same period of 2020. Costs associated the OVATION 2 Study increased to $0.9 million in the first half of 2020 compared to $0.5 million in the same period of 2020. The Company initiated enrollment in the Phase 2 portion of the study during the third quarter of 2020. Costs associated with the OPTIMA Study decreased to $0.4 million in the first half of 2021 compared to $1.3 million in the same period of 2020. In July 2020, the Company unblinded the OPTIMA Study at the recommendation of the DMC to halt the study due to futility. Regulatory costs were $0.2 million in the first half of 2021 compared to $0.4 million in the same period of 2020. Regulatory costs were $0.2 million in the first half of 2021 compared to $0.4 million in the same period of 2020. Other clinical costs were $0.9 million the first half of 2021 compared to $1.1 million in the same period of 2020. R&D costs associated with the development of GEN-1 to support the OVATION 2 Study as well as development of the PLACCINE DNA vaccine technology platform increased to $2.0 million in the first half of 2021 compared to $1.6 million in the same period of 2020. CMC costs decreased to $0.8 million in the first half of 2021 compared to $1.1 million in the same period of 2020.
General and Administrative Expenses
General and administrative expenses increased to $5.5 million in the first half of 2021 compared to $3.7 million in the same period of 2020. This increase is primarily attributable to higher non-cash stock compensation expense of approximately $0.8 million, an increase in professional fees of $0.7 million and an increase in premiums for directors’ and officers’ insurance of $0.2 million in the first half of 2021 when compared to the same period of 2020.
Change in Earn-out Milestone Liability and Warrant Expense
On March 28, 2019, the Company and EGWU, Inc, entered into an amendment to its purchase agreement (“Amended Asset Purchase Agreement”), whereby payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million had been modified. The Company has the option to make the payment as follows:
| a) | $7.0 million in cash within 10 business days of achieving the milestone; or |
| b) | $12.4 million in cash, common stock of the Company, or a combination of either, within one year of achieving the milestone. |
As of June 30, 2021, and December 31, 2020, the Company fair valued the earn-out milestone liability at $7.1 million and $7.0 million, respectively and recognized a non-cash charge of $0.1 million during the first half of 2021. In assessing the earnout milestone liability at June 30, 2021, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% / 50% probability for the $7.0 million and the $12.4 million payments, respectively.
As of June 30, 2020, and December 31, 2019, the Company fair valued the earn-out milestone liability at $6.0 million and $5.7 million, respectively and recognized a non-cash charge of $0.3 million during the first half of 2020. In assessing the earnout milestone liability at June 30, 2020, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 80% / 20% probability for the $7.0 million and the $12.4 million payments, respectively.
Investment income and interest expense
Investment income from its short-term investments was insignificant in the first half of 2021. The Company realized $0.1 million of investment income from its short-term investments during the first half of 2020.
As more fully discussed in Note 11, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipelines. In connection with this Horizon Technology Financing Facility, the Company incurred $0.4 million in interest expense in the first half of 2021 compared to $0.7 million during the same period of 2020. In connection with the termination of the Horizon Technology Financing Facility in the second quarter of 2021, the Company paid early termination and end of term charges to Horizon and recognized $0.2 million as a loss on debt extinguishment.
Financial Condition, Liquidity and Capital Resources
Since inception we have incurred significant losses and negative cash flows from operations. We have financed our operations primarily through the net proceeds from the sales of equity, credit facilities and amounts received under our product licensing agreement with Yakult and our technology development agreement with Hisun. The process of developing and commercializing ThermoDox®, GEN-1 and other product candidates and technologies requires significant research and development work and clinical trial studies, as well as significant manufacturing and process development efforts. We expect these activities, together with our general and administrative expenses, to result in significant operating losses for the foreseeable future. Our expenses have significantly and regularly exceeded our revenue, and we had an accumulated deficit of $323 million at June 30, 2021.
At June 30, 2021, we had total current assets of $60.3 million and current liabilities of $5.4 million, resulting in net working capital of $54.9 million. At June 30, 2021, we had cash and cash equivalents, short-term investments, interest receivable on short term investments and money market investments ($6.0 million of which is included in other assets) of $64.5 million. At December 31, 2020, we had total current assets of $18.8 million (including cash and cash equivalents of $17.2 million) and current liabilities of $6.8 million, resulting in net working capital of $12.0 million. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.
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Net cash used in operating activities for the first half of 2021 was $7.3 million. Net cash used in investing activities was $32.2 million during the first half of 2021. Net cash provided by financing activities was $54.8 million during the first half of 2021 mostly from net proceeds received through the sale of our common stock. With $64.5 million in cash and cash equivalents, short-term investments, interest receivable on short term investments and money market investments at June 30, 2021 and with potential future sales of the Company’s State of New Jersey net operating losses, the Company believes it has sufficient capital resources to fund its operations through 2024.
We expect to seek additional capital through further public or private equity offerings, debt financing, additional strategic alliance and licensing arrangements, collaborative arrangements, potential sales of our net operating losses, or some combination of these financing alternatives. If we raise additional funds through the issuance of equity securities, the percentage ownership of our stockholders could be significantly diluted, and the newly issued equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock. If we raise funds through the issuance of debt securities, those securities may have rights, preferences, and privileges senior to those of our common stock. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, we may need to relinquish rights to certain of our existing or future technologies, product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our technologies, product candidates, or products on terms that are not favorable to us. The overall status of the economic climate could also result in the terms of any equity offering, debt financing, or alliance, license, or other arrangement being even less favorable to us and our stockholders than if the overall economic climate were stronger. We also will continue to look for government sponsored research collaborations and grants to help offset future anticipated losses from operations and, to a lesser extent, interest income.
If adequate funds are not available through either the capital markets, strategic alliances, collaborators, or sales of our net operating losses, we may be required to delay or, reduce the scope of, or terminate our research, development, clinical programs, manufacturing, or commercialization efforts, or effect additional changes to our facilities or personnel, or obtain funds through other arrangements that may require us to relinquish some of our assets or rights to certain of our existing or future technologies, product candidates, or products on terms not favorable to us.
Off-Balance Sheet Arrangements and Contractual Obligations
None.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary objective of our investment activities is to preserve our capital until it is required to fund operations while at the same time maximizing the income, we receive from our investments without significantly increasing risk. Our cash flow and earnings are subject to fluctuations due to changes in interest rates in our investment portfolio. We maintain a portfolio of various issuers, types, and maturities. These securities are classified as available-for-sale and, consequently, are recorded on the condensed consolidated balance sheet at fair value with unrealized gains or losses reported as a component of accumulated other comprehensive loss included in stockholders’ equity.
Item 4. CONTROLS AND PROCEDURES
We have carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of June 30, 2021, which is the end of the period covered by this report, our disclosure controls and procedures are effective at the reasonable assurance level in alerting them in a timely manner to material information required to be included in our periodic reports with the SEC.
There were no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On September 20, 2019, a purported stockholder of the Company filed a derivative and putative class action lawsuit against the Company and certain officers and directors (the “Shareholder Action”). The Company was a defendant in this derivative and putative class action lawsuit in the Superior Court of New Jersey, Chancery Division, filed by a shareholder against the Company (as both a class action defendant and nominal defendant), and certain of its officers and directors (the “Individual Defendants”), with the caption O’Connor v. Braun et al., Docket No. MER-C-000068-19 (the “Shareholder Action”). The Shareholder Action alleged breaches of the defendants’ fiduciary duties based on allegations that the defendants omitted or made improper statements when seeking shareholder approval of the 2018 Stock Incentive Plan. The Shareholder Action sought, among other things, any damages sustained by the Company as a result of the defendants’ alleged wrongdoing, a declaratory judgment against all defendants invalidating the 2018 Stock Incentive Plan and declaring any awards made under the Plan invalid, rescinded, and subject to disgorgement, an order disgorging the equity awards granted to the Individual Defendants under the 2018 Stock Incentive Plan, and attorneys’ fees and costs.
On April 24, 2020, the Company, the Individual Defendants, and the plaintiff (the “Parties”) entered into a Settlement Agreement and Release (the “Settlement Agreement”), which memorializes the terms of the Parties’ settlement of the Shareholder Action (the “Settlement”). The Settlement calls for repricing of certain stock options and payment of plaintiff legal fees of $187,500. On July 24, 2020, the Court issued an order approving the Parties’ proposed form of notice to shareholders regarding the Settlement. A hearing was held on September 8, 2020 whereby the Court issued a final approval approving the Settlement. Pursuant to the Settlement, the Company paid $187,500 on October 1, 2020. Without admitting the validity of any of the claims asserted in the Shareholder Action, or any liability with respect thereto, and expressly denying all allegations of wrongdoing, fault, liability, or damage against the Company and the Individual Defendants arising out of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the Shareholder Action, the Company and the Individual Defendants concluded that it was desirable that the claims be settled on the terms and subject to the conditions set forth in the Settlement Agreement. The Company and the Individual Defendants entered into the Settlement Agreement for settlement purposes only and solely to avoid the cost and disruption of further litigation.
On October 29, 2020, a putative securities class action was filed against the Company and certain of its officers and directors (the “Spar Individual Defendants”) in the U.S. District Court for the District of New Jersey, captioned Spar v. Celsion Corporation, et al., Case No. 1:20-cv-15228. The plaintiff alleges that the Company and Individual Defendants made false and misleading statements regarding one of the Company’s product candidates, ThermoDox®, and brings claims for damages under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all Defendants, and under Section 20(a) of the Exchange Act of 1934 against the Spar Individual Defendants. The Company believes that the case is without merit and intends to defend it vigorously. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
In February 2021, a derivative shareholder lawsuit was filed against the Company, as the nominal defendant, and certain of its directors and officers as defendants in the U.S. District Court for the District of New Jersey, captioned Fidler v. Michael H. Tardugno et al., Case No. 3:21-cv-02662. The plaintiff alleges breach of fiduciary duty and other claims arising out of alleged statements made by certain of the Company’s directors and/or officers regarding ThermoDox®. The Company believes it has meritorious defenses to these claims and intends to vigorously contest this suit. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
Item 1A. Risk Factors
There have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of our 2020 Annual Report on Form 10-K. The risks and uncertainties described in our 2020 Annual Report on Form 10-K are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| 31.1+ | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2+ | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| + | Filed herewith. | |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Consolidated Balance Sheets, (ii) the unaudited Consolidated Statements of Operations, (iii) the unaudited Consolidated Statements of Comprehensive Loss, (iv) the unaudited Consolidated Statements of Cash Flows, (v) the unaudited Consolidated Statements of Change in Stockholders’ Equity (Deficit), and (vi) Notes to Consolidated Financial Statements. | |
| * | Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing. | |
| ** | XBRL information is filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| August 12, 2021 | CELSION CORPORATION | |
| Registrant | ||
| By: | /s/ Michael H. Tardugno | |
| Michael H. Tardugno | ||
| Chairman, President and Chief Executive Officer | ||
| By: | /s/ Jeffrey W. Church | |
| Jeffrey W. Church | ||
| Executive Vice President and Chief Financial Officer | ||
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