The information and financial data discussed below is derived from the audited
consolidated financial statements of Actinium Pharmaceuticals, Inc. for its
fiscal years ended December 31, 2020 and 2019. The consolidated financial
statements of Actinium Pharmaceuticals, Inc. were prepared and presented in
accordance with generally accepted accounting principles in the United States.
The information and financial data discussed below is only a summary and should
be read in conjunction with the historical financial statements and related
notes of Actinium Pharmaceuticals, Inc. contained elsewhere in this Report. The
financial statements contained elsewhere in this Report fully represent Actinium
Pharmaceuticals, Inc.'s financial condition and operations; however, they are
not indicative of the Company's future performance. See "Cautionary Note
Regarding Forward-Looking Statements" above for a discussion of forward-looking
statements and the significance of such statements in the context of this
Report.
Actinium Pharmaceuticals, Inc. is a clinical-stage, biopharmaceutical company
applying its proprietary platform technology and deep understanding of
radiobiology to the development of novel targeted therapies known as Antibody
Radiation-Conjugates, or ARCs. Radiation is an effective therapeutic modality
that is used in the treatment of over fifty percent of all cancer patients and
is often combined with chemotherapy, immunotherapy and other treatments for
greater therapeutic effect. Radiation is typically administered via an external
beam source from outside the body, leading to off-target exposure to normal
healthy tissue and organs, which can constrain the amount of radiation that can
be administered to patients due to associated dose-limiting toxicities. In
addition, use of external beam radiation is largely limited to solid tumors and
cannot be used in blood cancers, which are diffuse throughout the body of a
patient. ARCs combine the cell-killing ability of radiation via a radioisotope
payload with a targeting agent, such as a monoclonal antibody to deliver
radiation in a precise manner inside the body to specific, targeted cells, to
potentially achieve greater efficacy with lower toxicity than with external beam
radiation. ARCs enable a broader usage of radiation than external beam radiation
as they can be used in the treatment of both solid tumors and blood cancers.
Blood or hematologic cancers are known to be highly sensitive to radiation. Our
clinical pipeline is focused on ARCs targeting the antigens CD45 and CD33, both
of which are expressed in multiple hematologic cancers. Our clinical programs
are focused on two primary areas: (1) targeted conditioning prior to a bone
marrow transplant, or BMT, adoptive cell therapy, or ACT, such as CAR-T or gene
therapy and (2) ARC therapeutic combinations with other agents. Our product
development strategy is actively informed by clinical data with our ARCs in over
500 patients, including our ongoing Pivotal Phase 3 SIERRA trial. Our clinical
pipeline has emanated from our Antibody Warhead Enabling, or AWE technology
platform, which is protected by over 140 issued and pending patents, trade
secrets and know-how and is being utilized in a collaborative research
partnership with Astellas Pharma, Inc.
Recent Developments
Impact of COVID-19 Pandemic
In December 2019, a novel strain of COVID-19 was reported in China. Since then,
COVID-19 has spread globally. The spread of COVID-19 from China to other
countries has resulted in the World Health Organization (WHO) declaring the
outbreak of COVID-19 as a "pandemic," or a worldwide spread of a new disease, on
March 11, 2020. Many countries around the world have imposed quarantines and
restrictions on travel and mass gatherings to slow the spread of the virus and
have closed non-essential businesses, and as of the date of this report, many
local jurisdictions continue to have such restrictions in place.
As many local jurisdictions continue to have such restrictions in place, our
ability to continue to operate our business may also be limited. Such events may
result in a period of business, supply and drug product manufacturing
disruption, and in reduced operations, any of which could materially affect our
business, financial condition and results of operations. In response to
COVID-19, we implemented remote working and thus far have not experienced a
significant disruption or delay in our operations as it relates to the clinical
development of our drug candidates. Such government-imposed precautionary
measures may have been relaxed in certain countries or states, but there is no
assurance that more strict measures will be put in place again due to a
resurgence in COVID-19 cases, including those involving new variants of the
coronavirus, which may be more contagious and deadly than prior strains.
Therefore, the COVID-19 pandemic may continue to affect our operation, may
further divert the attention and efforts of the medical community to coping with
COVID-19 and disrupt the marketplace in which we operate and may have a material
adverse effect on our operations.
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The spread of COVID-19, which has caused a broad impact globally, may materially
affect us economically. While the ultimate economic impact brought by, and the
duration of, the COVID-19 pandemic may be difficult to assess or predict,
including new information which may emerge concerning the severity of COVID-19
and the actions to contain COVID-19 or treat its impact, among others, the
pandemic has resulted in significant disruptions in the general commercial
activity and the global economy and caused financial market volatility and
uncertainty in significant and unforeseen ways in the recent months. A
continuation or worsening of the levels of market disruption and volatility seen
in the recent past could have an adverse effect on our ability to access
capital, which could in the future negatively affect our liquidity. In addition,
a recession or market correction resulting from the spread of COVID-19 could
materially affect our business and the value of our common stock.
Currently, the Phase 3 SIERRA trial for our lead program, Iomab-B, continues to
remain active at a majority of our clinical trial sites, with investigators
providing feedback that recruitment and enrollment will remain active because of
the acute nature of the disease, the high unmet needs of patients with relapsed
or refractory AML, the potentially curative nature of BMT and the differentiated
profile of Iomab-B. Certain sites that had not been actively enrolling due to
COVID-19 at the initial outbreak of the pandemic resumed recruitment and
enrollment in mid-2020, and we currently do not have any sites that are not
recruiting and enrolling patients due to COVID-19. We also believe our earlier
stage clinical trials for our CD33 program will also continue to recruit and
enroll patients given the acute nature of relapsed or refractory AML. The
continuation of the pandemic could adversely affect our planned clinical trial
operations, including our ability to conduct the trials on the expected
timelines and recruit and retain patients and principal investigators and site
staff who, as healthcare providers, may have heightened exposure to COVID-19 if
their geography is impacted by the pandemic. Further, the continuation and/or
resurgence of the COVID-19 pandemic could result in delays in our clinical
trials due to prioritization of hospital resources toward the pandemic,
restrictions in travel, potential unwillingness of patients to enroll in trials
at this time, or the inability of patients to comply with clinical trial
protocols if quarantines or travel restrictions impede patient movement or
interrupt healthcare services. In addition, we rely on independent clinical
investigators, contract research organizations and other third-party service
providers to assist us in managing, monitoring and otherwise carrying out our
preclinical studies and clinical trials, and the pandemic may affect their
ability to devote sufficient time and resources to our programs or to travel to
sites to perform work for us.
Additionally, COVID-19 may result in delays in receiving approvals from local
and foreign regulatory authorities, delays in necessary interactions with IRB's
or Institutional Review Boards, local and foreign regulators, ethics committees
and other important agencies and contractors due to limitations in employee
resources or forced furlough of government employees.
To date, COVID-19 has not had a financial impact on our company. However,
COVID-19 has caused severe disruptions in transportation and limited access to
our facility, resulting in limited support from our staff and professional
advisors.
We continue to monitor the impacts of COVID-19 on the global economy and on our
business operations. However, the ultimate impact from COVID-19 on our business
operations and financial results during 2021 will depend on, among other things,
the ultimate severity and scope of the pandemic, the pace at which governmental
and private travel restrictions and public concerns about public gatherings will
ease, the rate at which historically large increases in unemployment rates will
decrease, if at all, and whether, and the speed with which the economy recovers.
We are not able to fully quantify the impact that these factors will have on our
financial results during 2021 and beyond, but developments related to COVID-19
may materially affect us in 2021.
46
Results of Operations - Year Ended December 31, 2020 Compared to the Year Ended
December 31, 2019
The following table sets forth, for the periods indicated, data derived from our
statements of operations:
For the year ended
December 31, Increase
(in thousands) 2020 2019 (Decrease)
Revenues $ - $ - $ -
Operating expenses:
Research and development, net of reimbursements 16,085 16,550 (465 )
General and administrative 6,308 5,522 786
Total operating expenses 22,393 22,072 321
Other income
Interest income - net 178 172 6
Total other income 178 172 6
Net loss $ (22,215 ) $ (21,900 ) $ (315 )
Revenues
We recorded no commercial revenues for the years ended December 31, 2020 and
2019, respectively.
Research and Development Expense
Research and development expenses declined by $0.5 million to $16.1 million for
the year ended December 31, 2020 compared to $16.6 million for the year ended
December 31, 2019. The decrease was primarily attributable to lower expenses
related to our CD33 program, mostly offset by higher expenses on our CD45
program.
General and Administrative Expenses
General and administrative expenses increased by $0.8 million to $6.3 million
for the year ended December 31, 2020 compared to $5.5 million for the year ended
December 31, 2019, primarily attributable to higher third-party professional
fees, including consultants, investor relations and recruiters.
Other Income
Other income of $0.2 million for both time periods was attributable to interest
income - net.
Net Loss
Net loss increased by $0.3 million to $22.2 million for the year ended December
31, 2020 compared to $21.9 million for the year ended December 31, 2019,
primarily due to higher general and administrative expenses.
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Liquidity and Capital Resources
We have financed our operations primarily through sales of our stock, pre-funded
warrants and warrants.
The following tables sets forth selected cash flow information for the periods
indicated:
For the year ended
December 31,
(in thousands) 2020 2019
Cash used in operating activities $ (21,618 ) $ (21,462 )
Cash used in investing activities (253 ) (64 )
Cash provided by financing activities 76,177 17,114
Net change in cash, cash equivalents and restricted cash $ 54,306 $ (4,412 )
Net cash used in operating activities for the year ended December 31, 2020 of
$21.6 million increased by $0.1 million from $21.5 million used in operations
for the prior year, primarily due to the timing of payments to vendors.
Net cash used in investing activities of $253 thousand and $64 thousand for the
years ended December 31, 2020 and December 31, 2019, respectively, was for the
purchase of equipment.
Net cash provided by financing activities was mainly generated by the sale of
shares of common stock, pre-funded warrants and warrants. Net cash provided by
financing activities was $76.2 million for the year ended December 31, 2020,
reflecting $76.6 million in proceeds from the sales of common stock and
pre-funded warrants in April and June 2020 and sales of common stock throughout
2020. During 2019, net cash provided by financing activities was $17.1 million,
reflecting $15.9 million in proceeds from the sale of common stock and warrants,
plus $1.5 million in proceeds from the exercise of warrants.
On April 24, 2020, we issued and sold 4.3 million shares of common stock and
pre-funded warrants to purchase 2.8 million shares of common stock. The price to
the public for each share of common stock sold in the offering was $4.50, and
the price to the public for each pre-funded warrant sold in the offering was
$4.497. The pre-funded warrants were exercisable at an exercise price of $0.003
per share and were exercisable immediately upon issuance. Gross proceeds from
this offering were $31.6 million, before deducting underwriting discounts and
commissions and other offering expenses payable by us. Net proceeds from the
offering were approximately $29.1 million
On June 19, 2020, we issued and sold 1.9 million shares of common stock and
pre-funded warrants to purchase 0.7 million shares of common stock. The price to
the public in this offering for each share of common stock was $9.75 and for
each pre-funded warrant was $9.747. Each pre-funded warrant had an exercise
price of $0.003 per share and were exercisable immediately upon issuance. Gross
proceeds from this offering to us were $25.0 million, before deducting
underwriting discounts and commissions and other offering expenses payable us.
Net proceeds from this offering were approximately $23.0 million.
During the year ended December 31, 2020, holders of all 2.8 million pre-funded
April 2020 warrants and 0.7 million pre-funded June 2020 warrants exercised
their pre-funded warrants at $0.003 per share and received 2.8 million shares of
common stock and 0.7 million shares of common stock, respectively.
In August 2020, we entered a Capital on Demand™ Sales Agreement with
JonesTrading, pursuant to which we may sell, from time to time, through or to
JonesTrading, up to an aggregate of $200 million of our common stock. Shares of
common stock are offered pursuant to our shelf registration statement filed with
the SEC on August 7, 2020. As of December 31, 2020, we sold 2.1 million shares
of common stock, resulting in gross proceeds of $22.6 million and net proceeds
of $21.7 million.
48
In December 2018, we entered into the Amended and Restated At Market Issuance
Sales Agreement with B. Riley FBR, Inc. and JonesTrading pursuant to which we
conducted our at-the market program. In early 2020, we sold 0.3 million shares
of common stock through our at-the-market program, resulting in net proceeds of
$2.5 million.
In October 2018, we and Lincoln Park Capital Fund, LLC, or Lincoln Park entered
into a purchase agreement and a registration rights agreement, pursuant to which
we have the right to sell to Lincoln Park shares of our common stock having an
aggregate value of up to $32.5 million, subject to certain limitations and
conditions set forth in the agreement. In early 2020, we elected to sell to
Lincoln Park 27 thousand shares and received $0.2 million.
In April 2019, we sold 1.4 million shares of common stock at an offering price
of $11.55 per share and warrants to purchase 1.4 million shares of common stock
at an exercise price of $15.00 per share and with a term of 5 years, resulting
in gross proceeds of $16.5 million and net proceeds of $15.1 million after
deducting underwriting and other offering expenses.
As of the date of filing this report, we expect that our existing resources will
be more than sufficient to fund our planned operations for more than 12 months
following the date of this report.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States, or GAAP. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities and expenses and the disclosure of contingent assets and liabilities
in our consolidated financial statements during the reporting periods. These
items are monitored and analyzed by us for changes in facts and circumstances,
and material changes in these estimates could occur in the future. We base our
estimates on historical experience, known trends and events, and on various
other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Changes
in estimates are reflected in reported results for the period in which they
become known. Actual results may differ materially from these estimates under
different assumptions or conditions
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset, or
paid to transfer a liability, in an orderly transaction between market
participants. A fair value hierarchy has been established for valuation inputs
that gives the highest priority to quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.
Research and Development Costs
Research and development costs are expensed as incurred. These costs include the
costs of manufacturing drug components and final drug product, the costs of
clinical trials, costs of employees and associated overhead, and depreciation
and amortization costs related to facilities and equipment. Research and
development reimbursements are recorded by us as a reduction of research and
development costs.
Share-Based Payments
We estimate the fair value of each stock option award at the grant date by using
the Black-Scholes option pricing model. The fair value determined represents the
cost for the award and is recognized over the vesting period during which an
employee is required to provide service in exchange for the award. We account
for forfeitures of stock options as they occur.
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Income Taxes
We use the asset and liability method to calculate deferred taxes. Deferred
taxes are recognized based on the differences between the financial reporting
and income tax bases of assets and liabilities using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse. We
review deferred tax assets for a valuation allowance based upon whether it is
more likely than not that the deferred tax asset will be fully realized. A
valuation allowance, if necessary, is provided against deferred tax assets,
based upon our assessment as to their realization.
We recognize tax when the positions meet a "more-likely-than-not" recognition
threshold. There were no tax positions for which it is considered reasonably
possible that the total amounts of unrecognized tax benefits will significantly
increase or decrease within the next year. We recognize interest related to
unrecognized tax benefits in interest expense and penalties in operating
expenses.
Accounting Standards Recently Adopted
In August 2018, FASB issued ASU 2018-13, Fair Value Measurement - Disclosure
Framework (Topic 820). The updated guidance improves the disclosure requirements
on fair value measurements, primarily associated with Level 3 fair value
measurements and is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. Early adoption is permitted
upon issuance of the standard for disclosures modified or removed with a delay
of adoption of the additional disclosures until their effective date. We adopted
this standard effective January 1, 2020 and the standard did not have a
significant impact to our financial statements.
In November 2018, FASB issued ASU 2018-18, Collaborative Arrangements (Topic
808): Clarifying the Interaction Between Topic 808 and Topic 606,which, among
other things, provides guidance on how to assess whether certain collaborative
arrangement transactions should be accounted for under Topic 606. The amendments
in this ASU are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019, with early adoption permitted.
We adopted this standard effective January 1, 2020 and the standard did not have
a significant impact to our financial statements.
Recent Accounting Standards
In August 2020, FASB issued ASU 2020-06, Debt-Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity's Own Equity, which, among other things, provides guidance on how
to account for contracts on an entity's own equity. This ASU simplifies the
accounting for certain financial instruments with characteristics of liabilities
and equity. Specifically, the ASU eliminates the need for us to assess whether a
contract on the entity's own equity (1) permits settlement in unregistered
shares, (2) whether counterparty rights rank higher shareholder's rights, and
(3) whether collateral is required. In addition, the ASU requires incremental
disclosure related to contracts on the entity's own equity and clarifies the
treatment of certain financial instruments accounted for under this ASU on
earnings per share. This ASU may be applied on a full retrospective of modified
retrospective basis. This ASU is effective January 1, 2022 and interim periods
presented. Early adoption of the ASU is permitted by us effective January 1,
2021. We are in the process of assessing the adoption of the ASU on our
financial statements.
Subsequent Events
Since December 31, 2020 we have sold 1.7 million shares of common stock under
our Capital on Demand™ Sales Agreement with JonesTrading, resulting in net
proceeds of $14.4 million.
In January 2021, we announced a collaborative research agreement with Astellas
Pharma, Inc. and began work on this project that will utilize our AWE technology
platform with select targeting agents owned by Astellas in the development of
theranostics for solid tumor indications, which combine the ability of
radioisotopes to be used for both diagnostic and therapeutic purposes.
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