Diffusion Pharmaceuticals Reports 2017 Financial Results and Provides Business Update
Source: Nasdaq GlobeNewswire / 03 Apr 2018 12:30:48 Europe/London
- Patient Enrollment in Phase 3 Inoperable GBM Brain Cancer Trial Underway
- Raised $12 Million in Underwritten Public Offering
- Preparing to Commence Clinical Trial with TSC in Stroke
- Expanded Intellectual Property Portfolio with New Key Patents
CHARLOTTESVILLE, Va., April 03, 2018 (GLOBE NEWSWIRE) -- Diffusion Pharmaceuticals Inc. (Nasdaq:DFFN) (“Diffusion” or “the Company”), a clinical-stage biotechnology company focused on extending the life expectancy of cancer patients using the novel small molecule trans sodium crocetinate (TSC) in conjunction with standard radiation and chemotherapy, reports 2017 financial results and provides a business update. Diffusion’s lead clinical trial program, the INvestigation of TSC Against Cancerous Tumors (INTACT) trial, is a Phase 3 study expected to enroll a total of 236 patients, with half in the treatment arm and half in the control arm. The design of INTACT is based on an almost four-fold increase in overall survival at two years demonstrated in inoperable GBM patients in the preceding Phase 2 study.
“We began opening clinical sites for the INTACT trial in December as planned, and started enrolling and dosing patients in January while continuing to open more clinical sites,” said David Kalergis, Chairman and Chief Executive Officer of Diffusion Pharmaceuticals. “We believe that the INTACT trial can provide a promising new treatment option for the thousands of patients who each year are newly diagnosed with inoperable GBM brain cancer and who, because of their poor prognosis, may be excluded from other clinical trials.”
In January 2018 the Company conducted a public offering, raising gross proceeds of approximately $12.0 million from the sale of common stock and warrants. In conjunction with this capital raise, all the Company’s preferred stock was converted into common stock, eliminating the obligation for future dividend payments and certain restrictive provisions contained therein.
In January 2018 the Company, along with researchers from the University of California Los Angeles (UCLA) and the University of Virginia (UVA), presented an abstract at the International Stroke Conference in Los Angeles describing a Phase 2 trial design to test TSC for use in acute stroke. The planned Phase 2, randomized, double-blind, placebo-controlled trial calls for the administration of TSC by specially-trained Emergency Medical Technicians to ambulance-transported patients within two hours of the onset of a suspected acute stroke, potentially overcoming the current severe timing obstacle in the treatment of stroke patients. The trial, which has been named the Pre-Hospital Ambulance Stroke Trial - TSC (PHAST-T) is expected to commence in late 2018, subject to funding.
The Company further expanded its intellectual property portfolio in 2017, with the allowance of key patents that increased coverage of the therapeutic use of TSC and related compounds. The new areas include congestive heart failure, chronic renal failure, acute lung injury, chronic obstructive pulmonary disease and respiratory distress syndrome. Additional claims were also allowed relating to the treatment of a number of cancer types including brain and pancreatic, using TSC along with chemotherapy and radiation therapy.
Financial Results for the Year Ended December 31, 2017
We had cash and cash equivalents of $8.9 million as of December 31, 2017. Subsequent to the close of the year, on January 22, 2018 we closed an underwritten public offering of stock and warrants, raising approximately $12.0 million in gross proceeds.
We recognized $5.1 million in research and development expenses during 2017, compared with $7.3 million during 2016. This decrease was primarily attributable to a decrease of $1.3 million related to animal toxicology studies, a decrease of $0.9 million of pancreatic expenses, a decrease of $0.6 million related to stock-based compensation expense and a decrease of $0.3 million in manufacturing-related expenses. We also recognized a $1.0 million impairment charge upon our abandonment of future development efforts related to our RES-440 IPR&D asset in 2016. These decreases were offset by increases in GBM trial expenses of $1.6 million as we prepared for the Phase 3 clinical trial for TSC and increases in salaries and wages expenses of $0.2 million as a result of an increase in headcount. We currently expect our research and development expenses to increase significantly in future periods due to costs associated with our Phase 3 clinical trial for TSC, the Phase 2 trial for pre-hospital stroke therapy and overall efforts to advance the research and development of our technologies and product candidates.
General and administrative expenses were $6.2 million during 2017, compared with $11.1 million during 2016. The decrease was primarily due to a decrease of $3.2 million in professional fees incurred in 2016 in connection with preparations to operate as a public company and a $2.5 million decrease in non-cash litigation settlement fees, offset by increases in salary and wages and stock-based compensation expense of $0.4 million and $0.4 million, respectively, due to our increase in headcount.
In connection with the private placement of our Series A convertible preferred stock and common stock warrants in March 2017, we determined the warrants to be classified as liabilities and subject to remeasurement at each reporting period. As such, during 2017 we recorded a $22.1 million non-cash gain for the change in fair value of our common stock warrant liabilities, which was primarily attributable to the decrease in the market price for our common stock. We also recognized $10.2 million in excess fair value of the common stock warrants over the gross proceeds from our private placement and $2.9 million in placement agent commissions and other offering costs.
About Diffusion Pharmaceuticals Inc.
Diffusion Pharmaceuticals Inc. is a clinical-stage biotechnology company focused on improving patient outcomes in unmet medical needs using its novel small molecule trans sodium crocetinate (TSC). Diffusion is developing TSC for use in conditions where hypoxia (oxygen deprivation) is known to diminish the effectiveness of standard of care (SOC) treatments. In oncology, TSC targets the cancer's hypoxic micro-environment, re-oxygenating treatment-resistant tissue and making the cancer cells more vulnerable to the therapeutic effects of SOC treatments without the apparent occurrence of any serious side effects. In non-oncology indications, therapeutic benefit would be achieved directly through re-oxygenation of the tissue threatened with cell death from hypoxia.
The INvestigation of TSC Against Cancerous Tumors (INTACT) Phase 3 randomized, controlled registration trial with TSC and SOC chemotherapy and radiation, compared with SOC alone in 236 patients who have been newly diagnosed with inoperable glioblastoma multiforme (GBM) brain cancer, is underway. In this study, TSC with concomitant temozolomide is being assigned to the first 8 subjects enrolled, and these patients will undergo radiation therapy plus temozolomide and TSC treatment through the normal six-week RT treatment period. During the subsequent temozolomide treatment period these subjects will be assigned TSC at ascending doses and studied in parallel for 2 full 28-day cycles. The Data Safety Monitoring Board will examine the resultant data and based on their observations may recommend the continued use of the starting TSC dose or another dose for those patients remaining to be randomized into the study.
A Phase 2 TSC clinical trial was completed in the second quarter of 2015 and evaluated 59 patients with newly diagnosed GBM. This open-label, historically controlled study demonstrated a favorable safety and efficacy profile for TSC combined with SOC, including a 37% improvement in overall survival compared with the control group at two years. A particularly strong efficacy signal was seen in the subset of inoperable patients where survival of TSC-treated patients at two years was nearly four-fold higher compared with the controls.
Due to its novel mechanism of action, TSC has safely re-oxygenated a range of tumor types in preclinical and clinical studies. Diffusion believes the therapeutic potential of TSC is not limited to specific tumors, thereby making it potentially useful to improve SOC treatments of other life-threatening cancers. Additional studies under consideration include Phase 2 trials in pancreatic cancer and brain metastases, with study initiation subject to receipt of additional funding or collaborative partnering. The Company also believes that TSC has potential application in other indications involving hypoxia including stroke, where the Company recently announced its Pre-Hospital Ambulance Stroke Trial - TSC (PHAST-T) study to be conducted in co-operation with the University of California Los Angeles (UCLA) and the University of Virginia (UVA) to test TSC in stroke patients in an in-ambulance clinical trial setting.
To the extent any statements made in this news release deal with information that is not historical, these are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the company's plans, objectives, expectations and intentions with respect to future operations and products, the potential of the company's technology and product candidates, the anticipated timing of future clinical trials, and other statements that are not historical in nature, particularly those that utilize terminology such as "would," "will," "plans," "possibility," "potential," "future," "expects," "anticipates," "believes," "intends," "continue," "expects," other words of similar meaning, derivations of such words and the use of future dates. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Uncertainties and risks may cause the company's actual results to be materially different than those expressed in or implied by such forward-looking statements. Particular uncertainties and risks include: general business and economic conditions; the company's need for and ability to obtain additional financing; and the difficulty of developing pharmaceutical products, obtaining regulatory and other approvals and achieving market acceptance, and the various risk factors (many of which are beyond Diffusion’s control) as described under the heading “Risk Factors” in Diffusion’s filings with the United States Securities and Exchange Commission. All forward-looking statements in this news release speak only as of the date of this news release and are based on management's current beliefs and expectations. Diffusion undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
-Tables to Follow-
Diffusion Pharmaceuticals Inc. Consolidated Balance Sheets December 31,
Assets Current assets: Cash and cash equivalents $ 8,896,468 $ 1,552,852 Prepaid expenses, deposits and other current assets 769,946 50,844 Total current assets 9,666,414 1,603,696 Property and equipment, net 460,652 79,755 Intangible asset 8,639,000 8,639,000 Goodwill 6,929,258 6,929,258 Other assets 450,491 232,675 Total assets $ 26,145,815 $ 17,484,384 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Current portion of convertible debt $ 550,000 $ 1,880,000 Accounts payable 511,956 1,684,158 Accrued expenses and other current liabilities 1,628,851 874,264 Total current liabilities 2,690,807 4,438,422 Convertible debt, net of current portion — 550,000 Deferred income taxes 2,223,678 3,279,363 Other liabilities 1,386 31,915 Total liabilities 4,915,871 8,299,700 Commitments and Contingencies Convertible preferred stock, $0.001 par value: Series A - 13,750,000 shares authorized, 12,376,329 and 8,306,278 shares issued and outstanding, respectively at December 31, 2017;
No shares authorized, issued or outstanding at December 31, 2016 (liquidation value of $16,778,682 at December 31, 2017)
— — Stockholders’ Equity: Common stock, $0.001 par value: 1,000,000,000 shares authorized; 14,519,629 and 10,345,637 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 14,520 10,346 Additional paid-in capital 82,770,313 69,363,575 Accumulated deficit (61,554,889 ) (60,189,237 ) Total stockholders' equity 21,229,944 9,184,684 Total liabilities, convertible preferred stock and stockholders' equity $ 26,145,815 $ 17,484,384 Diffusion Pharmaceuticals Inc. Consolidated Statements of Operations Year Ended December 31, 2017 2016 Operating expenses: Research and development $ 5,088,621 $ 7,252,241 General and administrative 6,191,845 11,094,146 Depreciation 67,981 25,342 Loss from operations 11,348,447 18,371,729 Interest expense, net 48,006 29,686 Change in fair value of warrant liabilities (22,072,322 ) — Warrant related expenses 10,225,846 — Other financing expenses 2,870,226 — Loss from operations before income tax benefit (2,420,203 ) (18,401,415 ) Income tax benefit (1,055,685 ) (364,796 ) Net loss $ (1,364,518 ) $ (18,036,619 ) Accretion of Series A cumulative preferred dividends (1,252,394 ) — Net loss attributable to common stockholders $ (2,616,912 ) $ (18,036,619 ) Per share information: Net loss per share of common stock, basic $ (0.21 ) $ (1.76 ) Net loss per share of common stock, diluted $ (1.94 ) $ (1.76 ) Weighted average shares outstanding, basic 12,447,641 10,232,791 Weighted average shares outstanding, diluted 12,755,316 10,232,791