$ADXS Form 10-Q

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Biotech Stocks

Form 10-Q for ADVAXIS, INC.


15-Jun-2015

Quarterly Report

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors” and incorporated by reference herein. See also the “Special Cautionary Notice Regarding Forward-Looking Statements” set forth at the beginning of this report.

You should read the following discussion and analysis in conjunction with the unaudited consolidated financial statements, and the related footnotes thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our annual report on Form 10-K for the year ended October 31, 2014.

Overview

We are a clinical-stage biotechnology company focused on the discovery, development and commercialization of proprietary Lm-LLO cancer immunotherapies. These immunotherapies are based on a platform technology that utilizes live attenuated Listeria monocytogenes, bioengineered to secrete antigen/adjuvant fusion proteins. These Lm -LLO strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions into a single immunotherapy as they access and direct antigen presenting cells to stimulate anti-tumor T-cell immunity, stimulate and activate the immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the tumor microenvironment to enable the T-cells to eliminate tumors.

ADXS-HPV Franchise

ADXS-HPV is an Lm -LLO immunotherapy directed against HPV and designed to target cells expressing the HPV. It is currently under investigation in three HPV-associated cancers: cervical cancer, head and neck cancer, and anal cancer, either as a monotherapy or in combination.

Cervical Cancer

There are 527,624 new cases of cervical cancer caused by HPV worldwide every year, and 14,377 new cases in the U.S. alone, according to the WHO Human Papillomavirus and Related Cancers in the World Summary Report 2014. Current preventative vaccines cannot protect the 20 million women who are already infected with HPV. Challenges with acceptance, accessibility, and compliance have resulted in approximately a third of young women being vaccinated in the United States and even less in other countries around the world.

We completed a randomized Phase 2 clinical study that was conducted exclusively in India in 110 women with recurrent/refractory cervical cancer. The final results, were presented at the 2014 American Society of Clinical Oncology (“ASCO”) Annual Meeting, and showed that 32% (35/109) of patients were alive at 12 months, 22% (24/109) of patients were Long-term Survivors (“LTS”) alive greater than 18 months, and 18% (16/91 evaluable with adequate follow-up) of patients were alive for more than 24 months. Of the 109 patients treated in the study, LTS included not only patients with tumor shrinkage but also patients who had experienced stable disease or increased tumor burden. 17% (19/109) of the patients in the trial had recurrence of disease after at least two prior treatments for their cervical cancer; these patients comprised 8% (2/24) of LTS. Among the LTS, 25% (3/12) of patients had an ECOG performance status of 2, a patient population that is often times excluded from clinical trials. Furthermore, a 10% objective response rate (including 5 complete responses and 6 partial responses) and a disease control rate of 38% (42/109) was observed. The addition of cisplatin chemotherapy to ADXS-HPV in this study did not significantly improve overall survival or objective tumor response (p =0.9981). 109 patients received 254 doses of ADXS-HPV. ADXS-HPV was found to be well tolerated with 38% (41/109) of patients experiencing mild to moderate Grade 1 or 2 transient adverse events associated with infusion; 1 patient experienced a Grade 3 SAE. All observed adverse events either self-resolved or responded readily to symptomatic treatment. Based on the results from the completed randomized Phase 2 clinical study, Biocon Limited (“Biocon”), our co-development and commercialization partner for ADXS-HPV in India and key emerging markets, plans to seek regulatory approval of ADXS-HPV in India for the treatment of recurrent/refractory cervical cancer.

The GOG, under the sponsorship of the Cancer Therapy Evaluation Program (“CTEP”) of the National Cancer Institute (“NCI”), is independently conducting an open-label, single arm Phase 2 study of ADXS-HPV in persistent or recurrent cervical cancer (patients must have received at least 1 prior chemotherapy regimen for the treatment of their recurrent/metastatic disease, not including that administered as a component of primary treatment) in the U.S., GOG-0265. The first stage of enrollment in GOG-0265 has successfully been completed with 26/29 patients treated and has met the predetermined safety and efficacy criteria required to proceed into the second stage of patient enrollment. As of January 2015, 27% (7/26) of patients were alive at one year (the predefined criteria for 12-month survival was ?20%); 6 additional patients were still alive, but with less than 12 months follow up, i.e., these 6 patients are eligible to exceed 12 month survival. The adverse events observed in the first stage of the study have been consistent with those reported in other clinical studies with ADSX-HPV. The second stage of the study of approximately 37 patients is now enrolling and has been amended to allow only one prior chemotherapy regimen for the treatment of their recurrent/metastatic disease and allows patients to continue to receive repeat cycles of therapy until disease progression.

We have completed an End-of-Phase 2 (“EOP2”) meeting with the FDA. The purpose of the EOP2 meeting was to discuss ADXS-HPV’s preclinical data, Chemistry, Manufacturing and Controls (“CMC”) and clinical program prior to moving ADXS-HPV forward into a registrational trial in cervical cancer. At the meeting, the FDA provided guidance on our CMC activities and clinical development plan. We have submitted our Phase 3 protocol for a Special Protocol Assessment (“SPA”) request to the FDA. The SPA request includes specific questions from us to facilitate a meaningful dialog with the FDA on the proposed study design. Following receipt, the FDA will determine the appropriateness of the SPA request and either notify us that the request is not appropriate or proceed with the assessment and provide comments to us within 45 calendar days. Additional rounds of review and/or a formal meeting are anticipated, both of which would extend the review period and be beneficial in reaching agreement with the FDA on design elements. Based on the FDA’s feedback, we may reach final agreement with FDA or may decide to incorporate the advice into the design of the Phase 3 clinical study without undergoing additional rounds of review. FDA’s assessment of the SPA request, and all related feedback, will be very valuable in the development of ADXS-HPV. We then plan to initiate, in collaboration with the GOG Foundation, Inc., an independent international non-profit organization with the purpose of promoting excellence in the quality and integrity of clinical and basic scientific research in the field of gynecologic malignancies, a registrational clinical trial in cervical cancer in 2015 to support a Biologics License Application (“BLA”) submission in the U.S. and in other territories around the world.

Subject to FDA concurrence under our request for a SPA, the registrational clinical trial that we plan to conduct will be a Phase 3 study of adjuvant ADXS-HPV following chemoradiation as primary treatment for high risk locally advanced cervical cancer compared to chemoradiation alone. This population has a high risk of recurrence and once recurred there is no cure. This study will evaluate both the time it takes for the cancer to recur as well as the overall survival. Our goal is to develop a treatment to prevent or reduce the risk of recurrence of cervical cancer after primary treatment interventions have ceased.

We are conducting a Phase 1/2 trial evaluating higher doses and repeat cycles of ADXS-HPV in patients with recurrent cervical cancer. This Phase 1/2 study is designed to evaluate the safety, efficacy and immunological effect of the highest-tolerated dose of ADXS-HPV administered in repeat cycles of treatment to patients with cervical cancer whose disease recurred after receiving one prior cytotoxic treatment regimen.

We have entered into a clinical trial collaboration agreement with MedImmune, LLC (“MedImmune”), the global biologics research and development arm of AstraZeneca, and have received FDA clearance of an IND to conduct a Phase 1/2, open-label, multicenter, two part study to evaluate the safety and immunogenicity of our investigational Lm -LLO cancer immunotherapy, ADXS-HPV, in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, MEDI4736, as a combination treatment for patients with metastatic HPV-associated squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated Squamous Cell Carcinoma Head and Neck (“SCCHN”).

We have entered into a clinical trial collaboration agreement with Incyte where we plan to conduct a Phase 2, open-label, multicenter study to evaluate the safety and immunogenicity of ADXS-HPV as a monotherapy and in combination with Incyte’s investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat (INCB24360), in patients with Stage I-IIa HPV-associated cervical cancer. The FDA has cleared the Ind application and Incyte plans to initiate this phase 2 in 2015.

ADXS-HPV has received orphan drug designation for invasive Stage II-IVb cervical cancer.

Head and Neck Cancer

SCCHN is the most frequently occurring malignant tumor of the head and neck and is a major cause of morbidity and mortality worldwide. More than 90% of SCCHNs originate from the mucosal linings of the oral cavity, pharynx, or larynx and 60-80% of these cancers are caused by HPV. According to the American Cancer Society, head and neck cancer accounts for about 3% to 5% of all cancers in the United States with the incidence of HPV-associated head and neck cancers increasing at an epidemic rate. Approximately 12,000 new cases will be diagnosed in the United Stated in 2015.

The safety and immunogenicity of ADXS-HPV is being evaluated in a Phase 2 study under an investigator-sponsored IND at Mount Sinai, in patients with HPV-positive head and neck cancer. This clinical trial is the first study to evaluate the effects of ADXS-HPV in patients when they are initially diagnosed with HPV-associated head and neck cancer. As of April 2015, 10 patients have been enrolled into the study.

As stated above, we recently entered into a clinical trial collaboration agreement with MedImmune to collaborate on a Phase 1/2, open-label, multicenter, two part study to evaluate safety and immunogenicity of MEDI4736 in combination with ADXS-HPV as a combination treatment for patients with metastatic HPV-associated squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. The FDA has cleared our IND application to commence this study in 2015.

ADXS-HPV has received orphan drug designation for HPV-associated head and neck cancer.

Anal Cancer

According to the American Cancer Society, most squamous cell anal cancers seem to be linked to infection by HPV, the same virus that causes cervical cancer. In fact, women with a history of cervical cancer (or pre-cancer) have an increased risk of anal cancer. While anal cancer is fairly rare and much less common than cancer of the colon or rectum, the incidence of anal cancer is increasing 2.2% a year according to the Surveillance, Epidemiology, and End Results (“SEER”) database mainly attributed to HPV infections. About 7,270 new cases will be diagnosed in the United States in 2015.

The safety and efficacy of ADXS-HPV is being evaluated in a Phase 2 study under an investigator-sponsored IND by Brown University in patients with high risk locally advanced anal cancer. As of March 2015, preliminary data from this study indicates all 10 patients who have completed the treatment regimen have experienced a six-month complete response rate, with no disease recurrence. Total planned enrollment for this study is 25 patients. In addition, we plan to initiate a Company sponsored single arm Phase 2 monotherapy study in patients with metastatic anal cancer in 2015.

We have entered into clinical trial collaboration agreement with the Radiation Therapy Oncology Group (“RTOG”) Foundation to evaluate the safety and efficacy of ADXS-HPV in a pivotal Phase 2/3 anal cancer trial, which will be run by NRG Oncology.

ADXS-HPV has received orphan drug designation for HPV-associated anal cancer.

ADXS-PSA Franchise

Prostate Cancer

According to the American Cancer Society, prostate cancer is the most common type of cancer found in American men, other than skin cancer. Prostate cancer is the second leading cause of cancer death in men, behind only lung cancer. One man in seven will get prostate cancer during his lifetime, and one man in 36 will die of this disease. About 220,800 new cases will be diagnosed in the United States in 2015.

ADXS-PSA is an Lm -LLO immunotherapy designed to target the PSA antigen associated with prostate cancer.

We have entered into a clinical trial collaboration and supply agreement with Merck & Co. (“Merck”) to evaluate the safety and efficacy of ADXS-PSA as monotherapy and in combination with KEYTRUDA� (pembrolizumab), Merck’s anti PD-1 antibody, in a Phase 1/2, open-label, multicenter, two part study in patients with previously treated metastatic, castration-resistant prostate cancer. The FDA has cleared our IND application and we have initiated this Phase 1/2 study.

ADXS-HER2 Franchise

HER2 Expressing Solid Tumors

ADXS-HER2 is an Lm -LLO immunotherapy designed to target the HER2 gene which is expressed in some solid tumor cancers such as human and canine osteosarcoma, breast, gastric and other cancers. The FDA has cleared our IND application and we plan to initiate a Phase 1b study in patients with metastatic HER2-expressing cancers in 2015. Thereafter, we intend to initiate a clinical development program with ADXS-HER2 for the treatment of pediatric osteosarcoma.

Osteosarcoma

Osteosarcoma affects about 400 children and teens in the U.S. every year, representing a small but significant unmet medical need that has seen little therapeutic improvement in decades. Osteosarcoma is considered a rare disease and may qualify for regulatory incentives including, but not limited to, orphan drug designation, patent term extension, market exclusivity, and development grants. Given the limited availability of new treatment options for osteosarcoma, and that it is an unmet medical need affecting a very small number of patients in the U.S. annually, we believe that, subject to regulatory approval, the potential to be on the market may be accelerated.

Based on encouraging preliminary data from a veterinarian clinical study in which pet dogs with naturally occurring osteosarcoma were treated with ADXS-HER2, we intend to initiate a clinical development program with ADXS-HER2 for the treatment of osteosarcoma. In this veterinarian clinical study, pet dogs with naturally occurring osteosarcoma treated with ADXS-HER2 after the standard of care showed a statistically significant prolonged overall survival benefit compared with dogs that received standard of care without ADXS-HER2 (median survival with ADXS-HER2 not reached vs. 316 days in disease-matched patient population, p <0.00001). Both veterinary and human osteosarcoma specialists consider canine osteosarcoma to be the best model for human osteosarcoma.

ADXS-HER2 has received orphan drug designation for osteosarcoma.

Canine Osteosarcoma

Under the direction of Dr. Nicola Mason, the University of Pennsylvania School of Veterinary is conducting a Phase 1 study in companion dogs evaluating the safety and efficacy of ADXS-HER2 in the treatment of canine osteosarcoma. The primary endpoint of the study is to determine the maximum tolerated dose of ADXS-HER2. Secondary endpoints for the study are progression-free survival and overall survival. The preliminary findings of the Phase 1 clinical trial in dogs with osteosarcoma suggest that ADXS-HER2 is safe and well tolerated at doses up to 3 x 10 9 CFU with no evidence of significant cardiac, hematological, or other systemic toxicities. The study determined that ADXS-HER2 is able to delay or prevent metastatic disease and significantly prolong overall survival in dogs with osteosarcoma that had minimal residual disease following standard of care (amputation and follow-up chemotherapy). Dr. Mason presented data at the 2014 American College of Veterinary Internal Medicine (“ACVIM”) Forum which showed that 80% of the dogs treated (n=15) were still alive and median survival had not yet been reached; median survival in control dogs (n=13) was 316 days. Immunological analyses are also being conducted in this study to further evaluate the immune response to ADXS-HER2. A second study has been conducted by Dr. Mason and presented at the 2015 ACVIM Forum in pet dogs (n=12) with primary osteosarcoma unsuitable for amputation. Repeat doses of ADXS-HER2 were well tolerated with no systemic or cardiac toxicity. As of June 2015, of the 12 canine patients recruited to date, seven were alive with current survival times ranging from 66 to 479 days. The median survival time of dogs receiving palliative radiation plus ADXS-HER2 has not been reached. The median time to progression of these 12 canine patients is 238 days. The reported median survival time for historical control dogs with OSA that do not undergo amputation but instead receive the same palliative radiation protocol without ADXS-HER2 is 136 days.

Osteosarcoma is the most common primary bone tumor in dogs, accounting for roughly 85% of tumors on the canine skeleton. Approximately 10,000 dogs a year (predominately middle to older-aged dogs and larger breeds) are diagnosed with osteosarcoma in the United States. This cancer initially presents as lameness and oftentimes visible swelling on the leg. Current standard of care treatment is amputation immediately after diagnosis, followed by chemotherapy. Median survival time with standard of care is ten to twelve months. For dogs that cannot undergo amputation, palliative radiation and analgesics are frequently employed and median survival times range from three to five months.

On March 19, 2014, we entered into a definitive Exclusive License Agreement with Aratana, where we granted Aratana an exclusive, worldwide, royalty-bearing, license, with the right to sublicense, certain of our proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for treatment of osteosarcoma and other cancer indications in animals. A product license request has been filed by Aratana for ADXS-HER2 (also known as AT-014 by Aratana) for the treatment of canine osteosarcoma with the USDA. While the USDA has no specific obligation to respond within a prescribed timeframe, the companies anticipate that AT-014 could receive conditional licensure from the USDA in 2016. Aratana has been granted exclusive worldwide rights by us to develop and commercialize ADXS-HER2 in animals. Aratana is further responsible for the conduct of clinical research with ADXS-Survivin in canine/feline lymphoma, as well as pending investigation of two additional Advaxis constructs in animals.

Lm-LLO Combination Franchise

ADXS-HPV and MEDI4736

As stated above, we have entered into a clinical trial collaboration agreement with MedImmune, where we plan to collaborate on a Phase 1/2, open-label, multicenter, two part study to evaluate safety and immunogenicity of our investigational Lm- LLO cancer immunotherapy, ADXS-HPV, in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, MEDI4736 for the treatment of patients with metastatic HPV-associated squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. The FDA has cleared our IND application and we plan to initiate this Phase 1/2 in 2015.

ADXS-HPV and INCB24360

As stated above, we have entered into a clinical trial collaboration agreement with Incyte where we plan to collaborate on a Phase 2, open-label, multicenter, preoperative window-study to evaluate the safety and immunogenicity of ADXS-HPV as a monotherapy and in combination with Incyte’s investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat (INCB24360), in patients with Stage I-IIa HPV-associated cervical cancer. The FDA has cleared the IND application and Incyte plans to initiate this Phase 2 in 2015.

ADXS-PSA and MK-3475

As stated above, we have entered into a clinical trial collaboration agreement with Merck to evaluate the safety and efficacy of ADXS-PSA as monotherapy and in combination with KEYTRUDA� (pembrolizumab), Merck’s anti PD-1 antibody, in a Phase 1/2, open-label, multicenter, two part study in patients with previously treated metastatic, castration-resistant prostate cancer. The FDA has cleared our IND application and we have initiated this Phase 1/2 study.

Lm -LLO Immunotherapy and GRU

We have a non-clinical research agreement with Georgia Regents University (“GRU”) for a research collaboration to evaluate the in vitro effect of our Lm -LLO cancer immunotherapy technology in combination with other immunotherapies, including, but not limited to, anti-PD-1 immune checkpoint inhibitors.

Lm -LLO Immunotherapy and Sorrento

We have entered into a non-exclusive research and clinical trial collaboration agreement with Sorrento Therapeutics, Inc. (“Sorrento”) to evaluate our Lm-LLO cancer immunotherapy technology in combination with Sorrento’s fully human antibodies targeting immune checkpoints, including GITR, OX40, LAG-3 and/or TIM-3, in two clinical trials.

Corporate

We have been added to the MSCI U.S. Small Cap 1750 Index, which is widely used by leading investors to build and manage their portfolios.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2015 AND 2014

Revenue

We did not record any revenue for the three months ended April 30, 2015.

During the three months ended April 30, 2014, we transitioned from a development stage company to an operating company. On March 19, 2014, we and Aratana Therapeutics Inc. (“Aratana”) entered into a definitive Exclusive License Agreement (“Agreement”) pursuant to which we granted Aratana an exclusive, worldwide, royalty-bearing, license, with the right to sublicense, certain Advaxis proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for treatment of osteosarcoma and other cancer indications in animals. Under the terms of the agreement. Aratana paid us an upfront payment of $1 million. As this license has stand-alone value to Aratana (who has the ability to sublicense) and was delivered to Aratana upon execution of the Agreement, we properly recorded the $1 million payment as licensing revenue in the three months ended April 30, 2014.

Research and Development Expenses

We make significant investments in research and development in support of our development programs both clinically and pre-clinically. Research and development costs are expensed as incurred and primarily include salary and benefit costs, third-party grants, fees paid to clinical research organizations, and supply costs. Research and development expense was $6.1 million for the three months ended April 30, 2015, compared with $1.5 million for the three months ended April 30, 2014, an increase of $4.6 million. The increase was primarily a result of higher third-party costs, specifically related to ADXS-HPV support in manufacturing and clinical trial expenses, for the Anal, Head & Neck, High Dose, and Cervical Cancer programs, as well as ADXS-PSA Phase 1/2 trial start-up support. In addition, greater stock based compensation costs and an increased headcount contributed to the increase.

We anticipate a significant increase in research and development expenses as a result of our intended expanded development and commercialization efforts primarily related to clinical trials and product development. In addition, we expect to incur expenses in the development of strategic and other relationships required to license, manufacture and distribute our product candidates when they are approved.

General and Administrative Expenses

General and administrative expenses primarily include salary and benefit costs for employees included in our finance, legal and administrative organizations, outside legal and professional services, and facilities costs. General and administrative expenses were $7.7 million for the three months ended April 30, 2015, compared with $2.1 million for the three months ended April 30, 2014, an increase of $5.6 million. The increase was primarily due to greater stock based compensation costs of $4.2 million and investor relations costs of $1.5 million, mainly non-cash, in the current period.

Interest Expense

Interest expense was $0 for the three months ended April 30, 2015, as compared to $3,238 for the three months ended April 30, 2014. The decrease in interest was due to the repayment of debt in the prior year.

Debt Conversion Expense

For the three months ended April 30, 2015, we recorded debt conversion expense of $6,599 as a result of inducing certain noteholders to convert their convertible promissory notes into common shares by offering conversion prices at a discount from the market price of the common stock.

Changes in Fair Values

For the three months ended April 30, 2015, the Company recorded non-cash expense from changes in the fair value of the warrant liability of $23,236 due to an increase in the fair value of liability warrants primarily resulting from a significant increase in our share price from $9.85 at January 31, 2015 to $16.81 at April 30, 2015, which was partially offset by the expiration of some warrants.

For the three months ended April 30, 2014, we recorded non-cash income from changes in the fair value of the warrant liability of $273,849 resulting from a decrease in the fair value of each liability warrant due to a decrease in our share price from $4.49, at January 31, 2014 to $2.72 at April 30, 2014 in addition to a smaller range of share prices used in the calculation of the BSM volatility input.

Other Income

Other income was $14,503 for the three months ended April 30, 2015, compared to other expense of $10,749 for the three months ended April 30, 2014. Interest income earned for the three months ended April 30, 2015 and 2014 reflected interest income earned on the Company’s savings account balance.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2015 AND 2014

Revenue

We did not record any revenue for the six months ended April 30, 2015.

During the six months ended April 30, 2014, we transitioned from a development stage company to an operating company. On March 19, 2014, we and Aratana entered into the Agreement pursuant to which we granted Aratana an exclusive, worldwide, royalty-bearing, license, with the right to sublicense, certain Advaxis proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for treatment of osteosarcoma and other cancer indications in animals. Under the terms of the agreement. Aratana paid us an upfront payment of $1 million. As this license has stand-alone value to Aratana (who has the ability to sublicense) and was delivered to Aratana upon execution of the Agreement, we properly recorded the $1 million payment as licensing revenue in the six months ended April 30, 2014.

Research and Development Expenses

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