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SNTI > SEC Filings for SNTI > Form 10-Q on 14-Feb-2013All Recent SEC Filings

Show all filings for SENESCO TECHNOLOGIES INC

Form 10-Q for SENESCO TECHNOLOGIES INC


14-Feb-2013

Quarterly Report


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

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q. The discussion and analysis may contain forward-looking statements that are based upon current expectations and entail various risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this report.

Overview

Our Business

The primary business of Senesco Technologies, Inc., a Delaware corporation incorporated in 1999, and its wholly-owned subsidiary, Senesco, Inc., a New Jersey corporation incorporated in 1998, collectively referred to as "Senesco," "we," "us" or "our," is to utilize our patented and patent-pending technology related to certain genes, primarily eukaryotic translation initiation Factor 5A, or Factor 5A, and deoxyhypusine synthase, or DHS, and related technologies for human therapeutic applications to develop novel approaches to treat cancer and inflammatory diseases.

For agricultural applications, we have licensed applications of the Factor 5A, DHS and Lipase platforms to enhance the quality, productivity and stress resistance of fruits, flowers, vegetables, agronomic and biofuel feedstock crops through the control of cell death, referred to herein as senescence, and growth in plants.

Human Therapeutic Applications

We believe that our Factor 5A gene regulatory technology could have broad applicability in the human therapeutic field, by either inducing or inhibiting programmed cell death, also known as apoptosis, which is the natural process the human body goes through in order to eliminate redundant or defective cells. Inducing apoptosis is useful in treating cancer where the defective cancer cells have failed to respond to the body's natural apoptotic signals. Conversely, inhibiting apoptosis may be useful in preventing, ameliorating or treating an exaggerated, acute immune response in a wide range of inflammatory and ischemic diseases attributable to or aggravated by premature apoptosis.

SNS01-T for Multiple Myeloma

We have developed a therapeutic candidate, SNS01-T, an improved formulation of SNS01, for the potential treatment of multiple myeloma and non-Hodgkin B-cell lymphoma. SNS01-T utilizes our Factor 5A technology and comprises two active components: a DNA plasmid, or pDNA, expressing human eIF5A containing a lysine to arginine substitution at amino acid position 50, or eIF5AK50R, and a small inhibitory RNA, or siRNA. These two components are combined in a fixed ratio with a polymer, polyethyleneimine, or PEI, which enables self-assembly of the DNA and RNA into nanoparticles with demonstrated enhanced delivery to tissues and protection from degradation in the blood stream. Under the control of a B cell selective promoter, SNS01-T's DNA plasmid up-regulates the apoptotic pathways within cancer cells by preferentially expressing the stable arginine form of the Factor 5A death message in target cells. The siRNA, by silencing the eIF5A gene, reduces expression of the hypusine form of Factor 5A that supports cell survival and proliferation. The silencing of the eIF5A gene by an eIF5A siRNA also down-regulates anti-apoptotic proteins, such as NFkB, ICAM and pro-inflammatory cytokines, which protect malignant cells from apoptosis and promote cell growth in multiple myeloma. The PEI, a cationic polymer, promotes auto-assembly of a nanoparticle with the other two components for intravenous delivery and protects the combination from degradation in the bloodstream until it is taken up by the tumor cell, where the siRNA and DNA plasmid are released.

We have performed efficacy, toxicological and dose-finding studies in vitro in non-human and human cells and in vivo in mice with SNS01. Our efficacy studies in severe combined immune-deficient, or SCID, mice with subcutaneous human multiple myeloma tumors tested SNS01 dose ranging from 0.15 mg/kg to 1.5 mg/kg. In these studies, mice treated with a dose of either 0.75 mg/kg or 1.5 mg/kg both showed, compared to relevant controls, a 91% reduction in tumor volume and a decrease in tumor weight of 87% and 95%, respectively. For mice that received smaller doses of either 0.38 mg/kg or 0.15 mg/kg, there was also a reduction in tumor volume of 73% and 61%, respectively, and weight of 74% and 36%, respectively. All SNS01 treated mice survived. This therapeutic dose range study provided the basis for a non-good laboratory practices, or GLP, 8-day maximum tolerated dose study in which normal mice received two intravenous doses of increasing amounts of SNS01 (from 2.2 mg/kg). Body weight, organ weight and serum levels of liver enzymes were used as clinical indices to assess toxicity. A dose between 2.2 mg/kg and 2.9 mg/kg was well tolerated with respect to these clinical indices, and the survival rate at 2.9 mg/kg was 80%. Mice receiving above 2.9 mg/kg of SNS01 showed evidence of morbidity and up to 80% mortality. The 2.9 mg/kg threshold was therefore determined to be the maximum tolerated dose in mice in this study. We have also completed our pivotal GLP toxicology studies in mice and dogs, employing SNS01-T, an improved formulation of SNS01, and have an open investigational new drug application, or IND, with the United States Food and Drug Administration, or FDA. We have also been granted orphan drug status for SNS01-T by the FDA for the potential treatment of multiple myeloma, mantle cell lymphoma and diffuse large B-cell lymphoma.

We are conducting a Phase 1b/2a clinical study with SNS01-T in multiple myeloma, diffuse large B cell lymphoma (DLBCL) and mantle cell lymphoma (MCL) patients. The clinical study is an open-label, multiple-dose, dose-escalation study, which is evaluating the safety and tolerability of SNS01-T when administered by intravenous infusion to relapsed or refractory multiple myeloma patients. The study design calls for four cohorts of three to six patients each. Patients in each cohort will receive twice-weekly dosing for six weeks followed by up to a four-week safety data review period before escalating to a higher dose level in the next cohort.

While the primary objective of this study is to evaluate safety and tolerability, the effect of SNS01-T on tumor response and time to relapse or progression will be assessed using multiple well-established metrics including measurement of monoclonal protein in multiple myeloma and CT imaging in MCL and DLBCL .

We have selected Mayo Clinic, University of Arkansas for Medical Sciences, the Randolph Cancer Center at West Virginia Universityand the John Theurer Cancer Center at Hackensack University Medical Center as our clinical sites. The study is open and we have completed our first cohort. The results of the first cohort showed that SNS01-T was safe and well tolerated and met the criteria for Stable Disease in 2 of the 3 evaluable patients. We are now treating patients in the second cohort.

We have demonstrated in human multiple myeloma cell lines that there may be an additional benefit to combining SNS01-T with other approved myeloma drugs, such as bortezomib and lenalidomide. We have shown, in vitro, that these drugs are up to forty (40) times more effective in inhibiting cell growth when used in combination with SNS01-T. These results further reinforce the significance of our target and will guide us in designing future clinical studies. We have demonstrated that a high level of tumor eradication in a mouse model of human multiple myeloma was achieved with a combination of SNS01-T and lenalidomide. While SNS01-T alone performed well by completely eliminating tumors in 40% of the animals, complete tumor eradication was achieved in five out of six or 83% of the treated animals that received SNS01-T combined with the optimal study dose of lenalidomide. This effect lasted throughout 6 weeks of observation after the end of treatment. Neither dose of lenalidomide used alone eliminated tumors in any of the treated mice. Most recently, we have demonstrated the benefits of combining SNS01-T with bortezomib. In a mouse model of human multiple myeloma, SNS01-T as a monotherapy achieved 59% tumor growth inhibition, which exceeded that of bortezomib alone at either the 0.2 mg/kg dose (22% inhibition) or at the 0.5 mg/kg dose (39% inhibition). However, the combination of SNS01-T with 0.5 mg/kg of bortezomib resulted in 89% tumor inhibition, which was significantly more effective than either SNS01-T or bortezomib alone.

SNS01-T for other B-cell cancers

We have demonstrated in mice that we can inhibit the growth of both human mantle cell and diffuse large B-cell lymphoma in a dose-dependent manner.

We have also demonstrated that the combination of lenalidomide and SNS01-T performs better than either treatment alone in mouse xenograft models of human mantle cell lymphoma.

When SCID mice, implanted with an aggressive human mantle cell lymphoma cell line (JVM2), were treated with either 15 mg/kg lenalidomide (5 times weekly by intra-peritoneal injection) or 0.375 mg/kg SNS01-T (twice weekly by intravenous injection) there was a growth delay of 4 days and 14 days, respectively. Mice treated with a combination of both drugs using the same dose levels and dosing regimens exhibited a tumor growth delay of 27 days (p value = 0.0008).

The median survival of mice treated with control nanoparticles was 21 days. Mice treated with lenalidomide or SNS01-T had a median survival of 28 days (33 % increase) and 37 days (76 % increase), respectively. Mice treated with the drug combination had a median survival of 52 days, an increase in survival of 148 %. Survival analysis using the Kaplan-Meier method revealed that treatment of mice with the drug combination resulted in statistically significant increases in survival compared to both SNS01-T (p value = 0.002) and lenalidomide (p value = 0.007) alone. We believe that the results of these studies not only support moving forward in multiple myeloma, but also support extending our clinical evaluation of SNS01-T in other B-cell cancers.

We may consider other human diseases in order to determine the role of Factor 5A and SNS01-T.

We may further expand our research and development program beyond the initiatives listed above to include other diseases and research centers.

Agricultural Applications

Our agricultural research focuses on the discovery and development of certain gene technologies, which are designed to confer positive traits on fruits, flowers, vegetables, forestry species and agronomic crops.

We have licensed this technology to various strategic partners. We may continue to license this technology, as opportunities present themselves, to additional strategic partners and/or enter into joint collaborations or ventures.

Our ongoing research and development initiatives for agriculture include assisting our license partners to:

further develop and implement the DHS and Factor 5A gene technology in banana, canola, cotton, turfgrass, rice, alfalfa, corn, soybean and trees; and

test the resultant crops for new beneficial traits such as increased yield, increased tolerance to environmental stress, disease resistance and more efficient use of fertilizer.

Agricultural Development and License Agreements

As of December 31, 2012, we have nine (9) active license agreements with established agricultural biotechnology companies.

Intellectual Property

We have twenty-seven (27) issued patents from the United States Patent and Trademark Office, or PTO, and seventy-one (71) issued patents from foreign countries. Of our ninety-eight (98) domestic and foreign issued patents, sixty-one (61) are for the use of our technology in agricultural applications and thirty-seven (37) relate to human therapeutics applications.

In addition to our ninety-eight (98) patents, we have a wide variety of patent applications, including divisional applications and continuations-in-part, in process with the PTO and internationally. We intend to continue our strategy of enhancing these new patent applications through the addition of data as it is collected.

Our agricultural patents are generally set to expire in 2019 in the United States and 2025 outside the United States. Our core human therapeutic technology patents are set to expire in 2021 in the United States and 2025 outside the United States, and our patents related to multiple myeloma are set to expire, both in and outside the United States in 2029.

During our 2012 and 2011 fiscal years, we reviewed our patent portfolio in order to determine if we could reduce our cost of patent prosecution and maintenance. We identified several patents and patents pending that we believe we no longer need to maintain without having a material impact on the portfolio. We determined that we would no longer incur the cost to prosecute or maintain those patents or patents pending.

Liquidity and Capital Resources

Overview

For the six months ended December 31, 2012, net cash of $1,201,869 was used in operating activities primarily due to a net loss of $3,355,339, which was reduced by non-cash expenses, of $1,221,428. Cash used in operating activities was also reduced by changes in operating assets and liabilities in the amount of $932,042.

The $932,042 change in operating assets and liabilities was primarily the result of a decrease in prepaid expenses in the amount of $252,976 and an increase in accounts payable and accrued expenses in the amount of $679,066.

During the six months ended December 31, 2012, cash used for investing activities amounted to $253,514, which was primarily related to patent costs incurred.

Cash provided by financing activities during the six months ended December 31, 2012 amounted to $94,183 related to the placement of common stock through our $5,500,000 ATM facility.

As of December 31, 2012, our cash balance totaled $640,125, and we had working capital deficit of $1,817,112.

In January 2013, we received net proceeds of approximately $2,900,000 from the issuance of common stock and warrants.

We expect our capital requirements to increase significantly over the next several years as we commence new research and development efforts, increase our business and administrative infrastructure and embark on developing in-house business capabilities and facilities. Our future liquidity and capital funding requirements will depend on numerous factors, including, but not limited to, the levels and costs of our research and development initiatives and the cost and timing of the expansion of our business development and administrative staff.

We anticipate that, based upon our cash balance at December 31, 2012 and the net proceeds from the issuance of common stock and warrants in January 2013, we will be able to fund our operations through July 2013. Over such period, we plan to fund our research and development and commercialization activities by:

utilizing our current cash balance and investments;

the placement of additional equity or debt instruments;

achieving some of the milestones set forth in our current licensing agreements; and

the possible execution of additional licensing agreements for our technology.

We cannot assure you that we will be able to raise money through any of the foregoing transactions on favorable terms, if at all.

Changes to Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates as set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, as amended.

Results of Operations

Three Months Ended December 31, 2012 andThree Months Ended December 31, 2011

The net loss for the three months ended December 31, 2012 was $1,269,885. The net loss for the three months ended December 31, 2011 was $1,527,571. Such a change represents a decrease in net loss of $257,686, or 16.9%. This decrease in net loss was primarily the result of a decrease in general and administrative expenses and research and development costs.

Revenue

There was no revenue during the three months ended December 31, 2012.

Total revenue in the amount of $200,000 for the three months ended December 31, 2011 consisted of a milestone payment in connection with an agricultural license agreement.

We anticipate that we will receive future milestone payments in connection with our current agricultural development and license agreements. Additionally, we may receive future royalty payments from our license agreements when our partners commercialize their crops containing our technology. However, it is difficult for us to determine our future revenue expectations because our future milestone payments are primarily contingent on our partners successful implementation of their development plan, we have no history of receiving royalties and the timing and outcome of our experiments, the timing of signing new partner agreements and the timing of our partners moving through the development process into commercialization is difficult to accurately predict.

General and Administrative Expenses



                                       Three Months December 31,
                                       2012                 2011         Change         %
                                                (in thousands, except % values)

Payroll and benefits               $        147         $        159     $   (12 )      (7.5 )%
Investor relations                           16                   75         (59 )     (78.7 )%
Professional fees                           237                  265         (28 )     (10.6 )%
Cash Director fees                           14                   11           3        21.4 %
Depreciation and amortization                67                   62           5         8.1 %
Other general and administrative             88                  104         (16 )     (15.4 )%
                                            569                  676        (101 )     (15.9 )%
Stock-based compensation                    140                  229         (89 )     (38.9 )%
Total general and administrative   $        709         $        905     $  (196 )     (21.7 )%

Payroll and benefits for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily as a result of a required 401K contribution during the three months ended December 31, 2011. Such a contribution was not required during the three months ended December 31, 2012.

Investor relations fees for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily as a result of a reduction in investor relations consulting costs and the timing of our annual meeting. We discontinued using an investor relations firm in August 2012. Also, we held our 2012 annual meeting in December 2011 but will not be holding our 2013 annual meeting until March 2013.

Professional fees for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily as a result of a decrease in legal fees. Legal fees decreased primarily due to fees incurred during the three months ended December 31, 2011 in connection with the exploration of alternative uses of our technology that were not incurred during the three months ended December 31, 2012. This decrease in legal fees was partially offset by an increase in legal fees in connection with the exploration of additional technologies and financing options during the three months ended December 31, 2012 which were not incurred during the three months ended December 31, 2011.

Cash director fees for the three months ended December 31, 2012 was higher than for the three months ended December 31, 2011, primarily as a result of more meetings being held during the three months ended December 31, 2012.

Depreciation and amortization for the three months ended December 31, 2012 was higher than for the three months ended December 31, 2011, primarily as a result of an increase in amortization of patent costs.

Other general and administrative expenses for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily due to a decrease in travel and conferences, which was partially offset by an increase in consulting costs related to our NYSE MKT delisting appeal.

Stock-based compensation for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily due to a lower Black-Scholes value on options vesting during the three months ended December 31, 2012 due to options that were forfeited prior to vesting.

We expect cash-based general and administrative expenses to remain relatively unchanged over the next twelve months.

Research and Development Expenses



                                                Three Months Ended December 31,
                                                2012                      2011             Change           %
                                                              (in thousands, except % values)
Payroll                                    $            44           $            42     $        2           4.8 %
Research contract with the University of
Waterloo                                               161                       138             23          16.7 %
Other research and development                         363                       557           (194 )       (34.8 )%
                                                       568                       737           (169 )       (22.9 )%
Stock-based compensation                                23                        15              8          53.3 %
Total research and development             $           591           $           752     $     (161 )       (21.4 )%

Payroll for the three months ended December 31, 2012 was higher than for the three months ended December 31, 2011, primarily as a result of salary increases.

The cost associated with the research contract with the University of Waterloo for the three months ended December 31, 2012 was higher than for the three months ended December 31, 2011, primarily due to an increase in amount being funded for human health research.

Other research and development costs for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily due to a decrease in the costs in connection with agricultural research programs and formulation studies, which was partially offset by an increase in costs associated with the development of SNS01-T for multiple myeloma.

Stock-based compensation for the three months ended December 31, 2012 was higher than for the three months ended December 31, 2011, primarily due to a higher Black-Scholes value of options vesting during the three months ended December 31, 2012.

The breakdown of our research and development expenses between our agricultural and human therapeutic research programs is as follows:

                                       Three Months Ended December 31,
                                   2012            %          2011        %
                                       (in thousands, except % values)
Agricultural                     $      3              1 %    $ 112        15 %
Human therapeutic                     588             99 %      640        85 %

Total research and development $ 591 100 % $ 752 100 %

Agricultural research expenses for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily due to a reduction in the funding for agricultural research at the University of Waterloo and the amendment to the Rahan Meristem agreement for the development of bananas. Effective January 1, 2012, we amended the Rahan Meristem agreement whereby we no longer incur costs related to such development.

Human therapeutic research expenses for the three months ended December 31, 2012 was lower than for the three months ended December 31, 2011, primarily as a result of the timing of certain aspects of the development of our drug candidate, SNS01-T, for treating multiple myeloma. Specifically, during the three months ended December 31, 2011, we incurred costs related to the formulation of SNS01-T, which we did not incur during the three months ended December 31, 2012.

We do not expect our human therapeutic research program to change as a percentage of the total research and development expenses.

Other non-operating income and expense

Fair value - warrant liability

The amounts represent the change in the fair value of the warrant liability for the three months ended December 31, 2012 and 2011.

Six Months Ended December 31, 2012 andSix Months Ended December 31, 2011

The net loss for the six months ended December 31, 2012 was $3,355,339. The net loss for the six months ended December 31, 2011 was $2,566,554. Such a change represents an increase in net loss of $788,785, or 30.7%. This increase in net loss was primarily the result of an increase in other non-operating expenses and a decrease in revenue, which was partially offset by a decrease in general and administrative expenses and research and development costs.

Revenue

There was no revenue during the six months ended December 31, 2012.

Total revenue in the amount of $200,000 for the six months ended December 31, 2011 consisted of a milestone payment in connection with an agricultural license agreement.

We anticipate that we will receive future milestone payments in connection with our current agricultural development and license agreements. Additionally, we may receive future royalty payments from our license agreements when our partners commercialize their crops containing our technology. However, it is difficult for us to determine our future revenue expectations because our future milestone payments are primarily contingent on our partners successful implementation of their development plan, we have no history of receiving royalties and the timing and outcome of our experiments, the timing of signing new partner agreements and the timing of our partners moving through the development process into commercialization is difficult to accurately predict.

General and Administrative Expenses



                                                Six Months Ended December 31,
                                                2012                    2011             Change           %
                                                             (in thousands, except % values)

Payroll and benefits                       $           289         $           296     $       (7 )        (2.4 )%
Investor relations                                      56                     120            (64 )       (56.0 )%
Professional fees                                      432                     403             29           7.2 %
Cash Director fees                                      28                      23              5          21.8 %
Depreciation and amortization                          130                     119             11           9.2 %
Other general and administrative                       188                     207            (19 )        (9.2 )%
                                                     1,123                   1,166            (45 )        (3.9 )%
Stock-based compensation                               319                     383            (64 )       (16.7 )%
Total general and administrative           $         1,442         $         1,551     $     (109 )        (7.0 )%

Payroll and benefits for the six months ended December 31, 2012 was lower than for the six months ended December 31, 2011, primarily as a result of a 401K contribution made during the six months ended December 31, 2011. There was no 401K contribution during the six months ended December 31, 2012.

Investor relations fees for the six months ended December 31, 2012 was lower than for the six months ended December 31, 2011, primarily as a result of a . . .

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