Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ADHXF > SEC Filings for ADHXF > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for ADHEREX TECHNOLOGIES INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ADHEREX TECHNOLOGIES INC


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

The discussion below contains forward-looking statements regarding our financial condition and our results of operations that are based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP in the United States of America ("U.S.") and have been prepared by and are the responsibility of the Company's management. The preparation of these consolidated unaudited financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable.

We operate in a highly competitive environment that involves significant risks and uncertainties, some of which are beyond our control. Our actual results, performance or achievements may be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Words such as "may", "will", "expect", "might", "believe", "anticipate", "intend", "could", "estimate", "project", "plan", and other similar words are one way to identify such forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements with respect to (1) our anticipated sources and uses of cash and cash equivalents; (2) our anticipated commencement dates, completion dates and results of clinical trials; (3) our efforts to pursue collaborations with the government, industry groups or other companies; (4) our anticipated progress and costs of our clinical and preclinical research and development programs; (5) our corporate and development strategies; (6) our expected results of operations;
(7) our anticipated levels of expenditures; (8) our ability to protect our intellectual property; (9) the anticipated applications and efficacy of our drug candidates; (10) our ability to attract and retain key employees; and (11) the nature and scope of potential markets for our drug candidates. All statements, other than statements of historical fact, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. We include forward-looking statements because we believe it is important to communicate our expectations to our investors. However, all forward-looking statements are based on management's current expectations of future events and are subject to a number of risks and uncertainties, including our need to raise money in the very near term and others as discussed in this report. Although we believe the expectations reflected in the forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained, and we caution you not to place undue reliance on such statements.

Overview

Adherex Technologies Inc. is a biopharmaceutical company focused on cancer therapeutics. We incorporated under the Canada Business Corporations Act ("CBCA"). At the Company's June 2011 Annual Meeting, shareholders of Adherex approved the continuation of Adherex Technologies' federal incorporation under the CBCA to incorporation under the Business Corporations Act (British Columbia).We have three wholly-owned subsidiaries: Oxiquant, Inc. and Adherex, Inc., both Delaware corporations, and Cadherin Biomedical Inc., a Canadian company.

On August 25, 2011, Adherex filed Articles of Amendment under the CBCA to implement an eighteen-for-one reverse stock split of our common stock (defined herein as the "Share Consolidation"). As a result of the Share Consolidation, every eighteen shares of common stock outstanding on August 25, 2011 were combined into one share of common stock. Our common stock began trading on the Toronto Stock Exchange and the OTC market (on the OTCQB tier) on a post-Share Consolidation basis on August 30, 2011. The Share Consolidation reduced the number of shares of the Company's outstanding common stock from approximately 452.8 million, to approximately 25.2 million as of August 25, 2011, the effective date of the Share Consolidation. Consequently, the Company has retroactively adjusted its financial statements for all periods presented to show the shares, stock options and warrants as if they had always been presented on this basis.

Our current prioritization initiative focuses primarily on our clinical activities with Eniluracil, as well as logistical and product support of ongoing clinical programs. Eniluracil was previously under development by GlaxoSmithKline. GlaxoSmithKline advanced Eniluracil into a comprehensive Phase III clinical development program that did not produce positive results and GlaxoSmithKline terminated further development. We developed a hypothesis as to why the GlaxoSmithKline Phase III trials were not successful and licensed the compound from GlaxoSmithKline in July 2005. We believe that Eniluracil might enhance and expand the therapeutic spectrum of activity of 5-FU, reduce the occurrence of a disabling side effect known as hand foot syndrome and allow 5-FU to be given orally. We expect the proceeds we received from the April 2010 Private Placement and the Rights Offering completed in March 2011 will be sufficient to fund a Phase II trial involving approximately 140 evaluable patients. We expect results from those trials to be indicative of the future viability of Eniluracil and will allow us to assess whether further development and testing of Eniluracil is warranted. The Phase II trial is currently open for recruitment in Russia and the United States and enrolled its first patient on April 27, 2011. The Company has enrolled 149 patients as of November 10, 2012 and anticipates that it will complete enrollment during the Company's fourth calendar quarter of 2012.

We are currently conducting Phase III trials of STS conducted by the International Childhood Liver Tumour Strategy Group, known as SIOPEL and the Children's Oncology Group. Each of these trials is managed by SIOPEL and the Children's Oncology Group, respectively, and each group is responsible for the costs of the trial. We continue to hold STS patents and our responsibility in the testing is limited to providing the drug, drug distribution and pharmacovigilance, or safety monitoring, for the study. The SIOPEL trial is expected to enroll approximately 100 pediatric patients with liver (hepatoblastoma) cancer at participating SIOPEL centers worldwide and the Children's Oncology Group study was designed to enroll up to 135 pediatric patients worldwide in five different disease indications. The Company's Children Oncology Group study completed enrollment during the three months ended June 30, 2012. The SIOPEL trial has enrolled 62 patients as of November 10, 2012.

Our common stock trades on the OTCQB in the United States. Our common stock also trades on the Toronto Stock Exchange. The Toronto Stock Exchange has continuing listing standards, including minimum market capitalization and other requirements, that we might not meet in the future, particularly if the price of our common stock does not increase or we are unable to raise capital to continue our operations. On September 18, 2012, the Toronto Stock Exchange issued an official delisting review of our common stock. The Company has been granted up to 120 days to comply with all of the TSX requirements for continued listing.

Our common stock trades on the OTCQB in the United States. Our common stock also trades on the Toronto Stock Exchange (the "TSX"). The TSX has continuing listing standards, including minimum market capitalization and other requirements, that we might not meet in the future, particularly if the price of our common stock does not increase or we are unable to raise capital to continue our operations. On September 18, 2012, the TSX issued an official delisting review of our common stock. The remedial delisting review was initiated because the value of the shares of our common stock that are held by "public shareholders" was below the CAD$2.0 million threshold required under the TSX continuing listing standards for a period of 30 consecutive trading days. Southpoint Capital LP ("Southpoint") holds approximately 11.1 million shares of our common stock or approximately 44.0% of the outstanding common stock of Adherex. Under the TSX continuing listing standards, the value of the shares held by Southpoint cannot be included when calculating the value of the shares held by "public shareholders". In order to regain compliance in this period, the market value of our Common Stock held by "public shareholders" is required to be CAD$2.0 million for more than 30 consecutive trading days. We have been granted up to 120 days to comply with all of the TSX requirements for continued listing. As of September 30, 2012, the market value of our Common Stock held by "public shareholders" was approximately CAD$2.3 million.

Adherex intends to work closely with the TSX throughout the process to ensure that the best interests of all shareholders are respected. However, it is the desire of Adherex to maintain a listing for the Company's shares. There can be no assurance that the Company will be able to achieve compliance with the TSX's listing requirements within the required time frame. If the Company cannot satisfy the TSX that continued listing on the TSX is warranted, it will explore the possibility of an alternative listing, including the Toronto Venture Exchange.

We have financed our operations since our inception on September 3, 1996 through the sale of equity and debt securities. We have not received and do not expect to have significant revenues from our product candidates until we are either able to sell our product candidates after obtaining applicable regulatory approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone payments, royalties or other revenue. We generated net income of approximately $1,348 for the nine months ended September 30, 2012. The net income for the period ended September 30, 2012 was primarily as a result of a $3,832 unrealized non-cash gain on derivative liabilities, offset by operating expenses relating principally to the Eniluracil Phase II clinical trial. As of September 30, 2012, our deficit accumulated during development stage was approximately $104,031.

As a result of our limited financial resources, we have postponed or terminated many of our previously planned or ongoing clinical development programs. We continue to pursue various strategic alternatives, including collaborations with other pharmaceutical and biotechnology companies. As a result, our filed Form 10-K for the year ended December 31, 2011 included a notation related to the substantial doubt of our ability to continue as a going concern. Our projections of our capital requirements are subject to substantial uncertainty. More capital than we had anticipated may be thereafter required. To finance our continuing operations we will need to raise substantial additional funds through either the sale of additional equity, the issuance of debt, the establishment of collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual property portfolio or from other sources. Given current economic conditions, we might not be able to raise the necessary capital or such funding may not be available on acceptable terms. If we cannot obtain adequate funding in the future, we might be required to further delay, scale back or eliminate certain research and development studies, consider business combinations or even shut down some, or all, of our operations.

Our operating expenses will depend on many factors, including the progress of our drug development efforts and the implementation of further cost reduction measures. Our research and development expenses, which include expenses associated with our clinical trials, drug manufacturing to support clinical programs, salaries for research and development personnel, stock-based compensation, consulting fees, sponsored research costs, toxicology studies, license fees, milestone payments, and other fees and costs related to the development of product candidates, will depend on the availability of financial resources, the results of our clinical trials and any directives from regulatory agencies, which are difficult to predict. Our general and administrative expenses include expenses associated with the compensation of employees, stock-based compensation, professional fees, consulting fees, insurance, and other administrative matters associated with our corporate office in Research Triangle Park, North Carolina in support of our drug development programs.

Results of Operations



Three months ended September 30, 2012 versus three months ended September 30,
2011:



                                                         Three Months              Three Months
                                                      Ended September 30,       Ended September 30,
In thousands of U.S. Dollars                                 2012                      2011               Change

Revenue                                              $                   -     $                   -     $       -
Operating expenses:
Research and development                                               357                       439           (82 )
General and administration                                             273                       505          (232 )
Total operating expenses                                               630                       944          (314 )

Loss from operations                                                  (630 )                    (944 )         314

Unrealized (loss) gain on derivatives                                 (139 )                  (2,221 )       2,082
Interest and other income                                                5                        21           (16 )
Net loss and total comprehensive loss                $                (764 )   $              (3,144 )   $   2,380

There was a small decrease in research and development expenses for the three months ended September 30, 2012 as compared to the same period in 2011 due to the lower enrollment and ongoing clinical expenses during the three months ended September 30, 2012 as compared to the same period in 2011. Research and development costs are impacted by the clinical support costs associated with the amount of patients enrolled and participating in the trial during the financial period. For the three months ended September 30, 2012, the Company enrolled 16 patients in the Phase II Eniluracil study in comparison to 25 patients enrolled in the three months ended September 30, 2011

The Company recorded an unrealized loss on derivatives of $139 in the three months ended September 30, 2012 compared to an unrealized loss of $2,221 in the three months ended September 30, 2011.These derivatives have been recorded at their fair value as a liability at issuance and will continue to be re-measured at fair value as a liability at each subsequent balance sheet date. Any change in value between reporting periods will be recorded as unrealized gain (loss). These warrants will continue to be reported as a liability until such time as they are exercised or expire. The fair value of these warrants is estimated using the Black-Scholes option-pricing model.

Our results of operations for the nine months ended September 30, 2012 versus nine months ended September 30, 2011 were as follows:

                                                          Nine Months               Nine Months
                                                      Ended September 30,       Ended September 30,
In thousands of U.S. Dollars                                 2012                      2011                Change

Revenue                                              $                   -     $                   -     $        -
Operating expenses:
Research and development                                             1,514                       988            526
General and administration                                             983                     1,548           (565 )
Total operating expenses                                             2,497                     2,536            (39 )
Unrealized gain (loss) on derivatives                                3,832                     3,683            149
Interest and other income                                               13                        29            (16 )
Net loss and total comprehensive loss                $               1,348     $               1,176     $      172

Total operating expenses were approximately $2,497 for the nine months ended September 30, 2012 and approximately $2,536 for the nine months ended September 30, 2011. Research and development expenses increased approximately $526 in the period ended September 30, 2012 compared to the similar period as a result of the increased enrollment and activity in the Phase II Eniluracil study. General and administrative expenses decreased $565 as a result of costs incurred during the nine months ended September 30, 2011 relating to the March 2011 Rights Offering.

Quarterly Information



The following table presents selected consolidated financial data for each of
the last eight quarters through September 30, 2012, as prepared under U.S. GAAP
(U.S. dollars in thousands, except per share information):



                                                   Basic and Diluted
   Three Month       Net (Loss) Income for       Net (Loss) Income per
   Period Ended            the Period                Common Share
December 31, 2010    $               (8,895 )   $                 (0.32 )
March 31, 2011                        4,669                        0.23
June 30, 2011                          (348 )                     (0.01 )
September 30, 2011                   (3,144 )                     (0.17 )
December 31, 2011                     3,508                        0.14
March 31, 2012                        2,715                        0.11
June 30, 2012                          (602 )                     (0.02 )
September 30, 2012                     (764 )                     (0.03 )

Liquidity and Capital Resources



In thousands of U.S. dollars                               September 30, 2012       December 31, 2011
Selected Asset and Liability Data:
Cash and cash equivalents                                  $             2,860     $             5,297
Other current assets                                                        70                      54
Derivative liabilities                                                   1,244                   5,077
Other current liabilities                                                  402                     394
Long term liabilities
Working capital [Current Assets - Current Liabilities
excluding the derivative liabilities]                                    2,528                   4,957
Selected Stockholders' Equity Data:
Common stock                                               $            65,952     $            65,952
Deficit accumulated during the development stage                      (104,031 )              (105,380 )
Total stockholders' equity (deficiency)                                  1,284                    (120 )

Cash and cash equivalents were approximately $5,297 at December 31, 2011 and approximately $2,860 at September 30, 2012. The decrease of approximately $2,437 is attributable to the Company's operating expenses.

Since our inception on September 3, 1996, we have financed our operations through the sale of equity and debt securities and have raised gross proceeds totaling approximately $88,900 through September 30, 2012.We have incurred net losses and negative cash flow from operations each year, and we had an accumulated deficit of approximately $104,031 at September 30, 2012. We have not generated any revenues to date through the sale of products. We do not expect to have significant revenues or income, other than interest income, until we are able to sell our product candidates after obtaining applicable regulatory approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone payments, royalties or other payments.

Net cash used in operating activities for the nine months ended September 30, 2012 was approximately $2,437, as compared to approximately $2,459 during the same period in 2011. This small decrease is due to expenses relating to the rights offering in 2011 which did not recur during the nine months ended September 30, 2012 offset by increased research and development expenses. There was no net cash provided by financing activities for the nine months ended September 30, 2012 as compared to approximately $2,566 during the same period in 2011.

Outstanding Share Information



The outstanding share data for our company as of September 30, 2012 (in
thousands):



                 September 30, 2012
Common shares                 25,158
Warrants                      18,035
Stock options                  4,817
Total                         48,010

Financial Instruments

We invest excess cash and cash equivalents in high credit quality investments held by financial institutions in accordance with our investment policy designed to protect the principal investment. At September 30, 2012, we had approximately $2,860 in cash accounts including $2,710 in money market investments. We have not experienced any loss or write down of our money market investments for the nine months ended September 30, 2012 and 2011, respectively.

Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrial companies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve months. This policy applies to all of our financial resources.

The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. As our main purpose is research and development, we have chosen to avoid investments of a trading or speculative nature.

Off-Balance Sheet Arrangements

Since our inception, we have not had any material off-balance sheet arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such activities.

Contractual Obligations and Commitments



We had no material commitments for capital expenses as of September 30, 2012.
The following table represents our contractual obligations and commitments at
September 30, 2012 (in thousands of U.S. dollars):



                                         Less than        1-3
                                          1 year         years      Total

OCT Clinical Service Agreement (1)      $       442     $     -     $  442
Oregon Health & Science University(2)           500           -        500
Total                                   $       942     $     -     $  942

(1) Under the service agreement with OCT Group LLC entered in August 2010, the Company is required to make several payments over the course of our Phase II clinical trial in Russia. The payments will be made upon the fulfillment of several milestones during the planned clinical trial including regulatory approval of trial, enrollment of patients and the completion of therapy of patients. The Company amended the agreement in April 2011 and August 2011 for the addition of additional sites for OCT to service during the Phase II clinical trial. Further, the Company amended the agreement in June 2012 for the transition to a paper-based database to be developed by OCT. In addition, the Company amended the agreement on October 29, 2012 for the addition of up to 20 patients to be enrolled.

(2) Under the license agreement with Oregon Health & Science University (OHSU) for STS, we are required to pay specified amounts in the event that we complete certain Adherex-initiated clinical trials. For example, upon the successful completion of the Phase III clinical trial with COG or SIOPEL, the Company may become responsible for a payment to OHSU of up to $0.5 million. In addition, under the license agreement upon the first commercial sale of STS we may become responsible for another payment to OHSU of up to $0.3 million. Royalty payments, which are contingent on sales, are not included.

Research and Development

Our research and development efforts have been focused on the development of cancer therapeutics and currently include Eniluracil and STS.

We have established relationships with contract research organizations, universities and other institutions, which we utilize to perform many of the day-to-day activities associated with our drug development. Where possible, we have sought to include leading scientific investigators and advisors to enhance our internal capabilities.

Research and development expenses for the three months ended September 30, 2012 and 2011 were $357 and $439, respectively, and for the nine months then ended totaled $1,514 and $988, respectively. The increase in research and development expenses for the nine months ended September 30, 2012 relates to the increased enrollment and ongoing clinical support of the Phase II Eniluracil trial. Research and development expenses included patient monitoring, database support and drug shipment costs to Russia.

Our product candidates are in various stages of development and still require significant, time-consuming and costly research and development, testing and regulatory clearances. In developing our product candidates, we are subject to risks of failure that are inherent in the development of products based on innovative technologies. For example, it is possible that any or all of these products will be ineffective or toxic, or will otherwise fail to receive the necessary regulatory clearances. There is a risk that our product candidates will be uneconomical to manufacture or market or will not achieve market acceptance. There is also a risk that third parties may hold proprietary rights that preclude us from marketing our product candidates or that others will market a superior or equivalent product. As a result of these factors, we are unable to accurately estimate the nature, timing and future costs necessary to complete the development of these product candidates. In addition, we are unable to reasonably estimate the period when material net cash inflows could commence from the sale, licensing or commercialization of such product candidates, if ever.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. These estimates are based on assumptions and judgments that may be affected by commercial, economic and other factors. Actual results could differ from these estimates.

Our critical and other accounting policies are consistent with those presented in our annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.

  Add ADHXF to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ADHXF - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.