þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Delaware | 83-0221517 | ||
(State or other jurisdiction of | (I.R.S. Employer I.D. No.) | ||
incorporation or organization) | |||
Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company þ
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(Do
not check if a smaller reporting
company)
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Page
No.
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PART I - FINANCIAL INFORMATION |
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Item 1. | Financial Statements: | ||
Condensed Consolidated Balance Sheets at | |||
March 31, 2008 (unaudited) and December 31, 2007 (audited) |
13
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Condensed Consolidated Statements of Operations (unaudited) for the | |||
three months ended March 31, 2008 and March 31, 2007 |
14
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Condensed Consolidated Statements of Cash Flows (unaudited) for the | |||
three months ended March 31, 2008 and March 31, 2007 |
15
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Notes to Unaudited Condensed Consolidated Financial Statements |
16
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
2
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Item 4T. | Controls and Procedures |
7
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PART II - OTHER INFORMATION |
Item 1 | Legal Proceedings |
8
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Item 1A | Risk Factors |
8
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Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds |
9
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Item 3 | Defaults Under Senior Securities |
9
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Item 4 | Submission of Matters to a Vote of Security Holders |
9
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Item 5 | Other Information |
9
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Item 6. | Exhibits |
9
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SIGNATURES |
12
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CERTIFICATIONS |
ITEM
2
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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·
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MuGard™
is our approved product for the management of oral mucositis, a frequent
side-effect of cancer therapy for which there is no established treatment.
The market for mucositis treatment is estimated to be in excess of US$1
billion world-wide. MuGard, a proprietary nanopolymer formulation, has
received marketing allowance in the U.S. from the Food & Drug
Administration (“FDA”).
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·
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Our
lead development candidate for the treatment of cancer is ProLindac™, a
nanopolymer DACH-platinum prodrug. ProLindac is currently in a Phase 2
clinical trial being conducted in the EU in patients with ovarian cancer.
The DACH-platinum incorporated in ProLindac is the same active moiety as
that in oxaliplatin (Eloxatin; Sanofi-Aventis), which has sales in excess
of $2.0 billion.
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·
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Pre-clinical
development of Cobalamin™, our proprietary nanopolymer oral drug delivery
technology based on the natural vitamin B12 uptake mechanism. We are
currently developing a product for the oral delivery of
insulin.
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·
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Pre-clinical
development of Angiolix®, a humanized monoclonal antibody which acts as an
anti-angiogenesis factor and is targeted to cancer cells, notably breast,
ovarian and colorectal cancers.
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·
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Pre-clinical
development of Prodrax®, a non-toxic prodrug which is activated in the
hypoxic zones of solid tumors to kill cancer
cells.
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·
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Pre-clinical
development of Alchemix®, a chemotherapeutic agent that combines multiple
modes of action to overcome drug
resistance.
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·
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Pre-clinical
development of Cobalamin-mediated targeted
delivery.
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·
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Phenylbutyrate
(“PB”), an HDAC inhibitor and a differentiating agent, is a Phase 2
clinical candidate being developed in collaboration with Virium
Pharmaceuticals.
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Compound
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Originator
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Technology
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Indication
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Clinical
Stage (1)
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MuGard™
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Access
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Mucoadhesive
liquid
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Mucositis
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Marketing
clearance received
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ProLindacTM
(Polymer
Platinate,
AP5346) (2)
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Access
– U London
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Synthetic
polymer
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Cancer
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Phase
2
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||||
Phenylbutyrate
(PB)
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National
Institute
of
Health
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Small
molecule
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Cancer
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Phase
2
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Oral
Insulin
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Access
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Cobalamin
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Diabetes
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Pre-clinical
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||||
Oral
Delivery System
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Access
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Cobalamin
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Various
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Pre-clinical
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||||
Angiolix®
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Immunodex,
Inc.
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Humanized
monoclonal
antibody
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Cancer
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Pre-clinical
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||||
Prodrax®
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Univ
London
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Small
molecule
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Cancer
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Pre-clinical
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||||
Alchemix®
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DeMontford
Univ
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Small
molecule
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Cancer
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Pre-clinical
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||||
Cobalamin-Targeted
Therapeutics
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Access
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Cobalamin
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Anti-tumor
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Pre-clinical
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||||
(1)
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For
more information, see “Government Regulation” for description of clinical
stages.
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(2)
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Licensed
from the School of Pharmacy, The University of London. Subject to a 1%
royalty and milestone payments on
sales.
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·
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the
Somanta acquisition resulted in a one-time non-cash in-process research
and development expense in the first quarter of 2008
($8,879,000);
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·
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costs
for product manufacturing for a new ProLindac clinical trial expected to
start in mid 2008 ($257,000);
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·
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higher
scientific consulting expenses
($60,000);
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·
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higher
salary and related cost due to the hiring of additional scientific staff
($40,000);
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·
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higher
clinical trial costs this quarter ($38,000);
and
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·
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other
net decreases ($42,000).
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·
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lower
salary related expenses due to stock option expenses
($233,000);
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·
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lower
patent expenses ($49,000); and
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·
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offset
by higher other net increases
($32,000).
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ITEM
2
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UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
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ITEM
6
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EXHIBITS
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Exhibits:
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2.2
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Agreement
and Plan of Merger, by and among Access Pharmaceuticals, Inc., Somanta
Acquisition Corporation, Somanta Pharmaceuticals, Inc., Somanta
Incorporated and Somanta Limited, dated April 18, 2007. (Incorporated by
reference to Exhibit 2.1 to our Form 8-K dated April 18,
2007)
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3.0
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Articles
of incorporation and bylaws:
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3.1
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Certificate
of Incorporation (Incorporated by Reference to Exhibit 3(a) of our Form
8-B dated July 12, 1989, Commission File Number
9-9134)
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3.2
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Certificate
of Amendment of Certificate of Incorporation filed August 21,
1992
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3.3
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Certificate
of Merger filed January 25, 1996. (Incorporated by reference to Exhibit E
of our Registration Statement on Form S-4 dated December 21, 1995,
Commission File No. 33-64031)
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3.4
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Certificate
of Amendment of Certificate of Incorporation filed January 25, 1996.
(Incorporated by reference to Exhibit E of our Registration Statement on
Form S-4 dated December 21, 1995, Commission File No.
33-64031)
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3.5
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Certificate
of Amendment of Certificate of Incorporation filed July 18, 1996.
(Incorporated by reference to Exhibit 3.8 of our Form 10-K for the year
ended December 31, 1996)
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3.6
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Certificate
of Amendment of Certificate of Incorporation filed June 18, 1998.
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended June 30, 1998)
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3.7
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Certificate
of Amendment of Certificate of Incorporation filed July 31, 2000.
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended March 31, 2001)
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3.8
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Certificate
of Designations of Series A Junior Participating Preferred Stock filed
November 7, 2001 (Incorporated by reference to Exhibit 4.1.h of our
Registration Statement on Form S-8, dated December 14, 2001, Commission
File No. 333-75136)
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3.9
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Amended
and Restated Bylaws (Incorporated by reference to Exhibit 3.1 of our Form
10-Q for the quarter ended June 30,
1996)
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10.30
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Employment
Agreement Amendment, dated April 9, 2008 between us and Jeffrey B.
Davis
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31.1
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Certification
of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to
Rule
13a-14(a)/15d-14(a)
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31.2
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Certification
of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to
Rule 13a-14(a)/15d-14(a)
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32.1*
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Certification
of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to 18
U.S.C. Section 1350
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32.2*
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Certification
of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to 18
U.S.C. Section 1350
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Date:
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May 20, 2008
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By:
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/s/ Jeffrey B. Davis
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Jeffrey
B. Davis
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|||
Chief
Executive Officer
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|||
(Principal
Executive Officer)
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|||
Date:
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May 20, 2008
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By:
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/s/ Stephen B. Thompson
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Stephen
B. Thompson
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|||
Vice
President and Chief Financial Officer
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(Principal
Financial and Accounting Officer
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March
31, 2008
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December
31, 2007
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||||||
ASSETS
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(unaudited)
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(unaudited)
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||||||
Current assets | ||||||||
Cash
and cash equivalents
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$ | 226,000 | 159,000 | |||||
Short
term investments, at cost
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6,163,000 | 6,762,000 | ||||||
Receivable
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- | 35,000 | ||||||
Receivables
due from Somanta Pharmaceuticals
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- | 931,000 | ||||||
Prepaid
expenses and other current assets
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142,000 | 410,000 | ||||||
Total
current assets
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6,531,000 | 8,297,000 | ||||||
Property
and equipment, net
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142,000 | 130,000 | ||||||
Patents,
net
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667,000 | 710,000 | ||||||
Other
assets
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12,000 | 12,000 | ||||||
Total
assets
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$ | 7,352,000 | $ | 9,149,000 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
Current liabilities | ||||||||
Accounts
payable and accrued expenses
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$ | 2,077,000 | $ | 1,796,000 | ||||
Accrued
interest payable
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233,000 | 130,000 | ||||||
Current
portion of deferred revenue
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82,000 | 68,000 | ||||||
Current
portion of long-term debt
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- | 64,000 | ||||||
Total
current liabilities
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2,392,000 | 2,058,000 | ||||||
Long-term
deferred revenue
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892,000 | 910,000 | ||||||
Long-term
debt
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5,500,000 | 5,500,000 | ||||||
Total
liabilities
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8,784,000 | 8,468,000 | ||||||
Commitments
and contingencies
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||||||||
Stockholders' equity (deficit) | ||||||||
Preferred
stock - $.01 par value; authorized 2,000,000 shares;
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||||||||
3,499.8617
issued at March 31, 2008; 3,227.3617 issued
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||||||||
at
December 31, 2007
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- | - | ||||||
Common
stock - $.01 par value; authorized 100,000,000 shares;
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||||||||
issued,
5,623,781 at March 31, 2008 and 3,585,458 at
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||||||||
December
31, 2007
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56,000 | 36,000 | ||||||
Additional
paid-in capital
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126,313,000 | 116,018,000 | ||||||
Notes
receivable from stockholders
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(1,045,000 | ) | (1,045,000 | ) | ||||
Treasury
stock, at cost – 163 shares
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(4,000 | ) | (4,000 | ) | ||||
Accumulated
deficit
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(126,752,000 | ) | (114,324,000 | ) | ||||
Total
stockholders' equity (deficit)
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(1,432,000 | ) | 681,000 | |||||
Total
liabilities and stockholders' equity (deficit)
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$ | 7,352,000 | $ | 9,149,000 |
Three
Months ended March 31,
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||||||||
2008
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2007
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|||||||
Revenues
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||||||||
License
revenues
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$ | 17,000 | $ | - | ||||
Sponsored
research and development
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21,000 | - | ||||||
Total
revenues
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38,000 | - | ||||||
Expenses
|
||||||||
Research
and development
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9,645,000 | 413,000 | ||||||
General
and administrative
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889,000 | 1,139,000 | ||||||
Depreciation
and amortization
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67,000 | 75,000 | ||||||
Total
expenses
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10,601,000 | 1,627,000 | ||||||
Loss
from operations
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(10,563,000 | ) | (1,627,000 | ) | ||||
Interest
and miscellaneous income
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76,000 | 35,000 | ||||||
Interest
and other expense
|
(108,000 | ) | (2,535,000 | ) | ||||
(32,000 | ) | (2,500,000 | ) | |||||
Net
loss
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(10,595,000 | ) | (4,127,000 | ) | ||||
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||||||||
Less
preferred stock dividends
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1,833,000 | - | ||||||
Net
loss allocable to common stockholders
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$ | (12,428,000 | ) | $ | (4,127,000 | ) | ||
Basic
and diluted loss per common share
Net
loss allocable to common stockholders
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$ | (2.31 | ) | $ | (1.17 | ) | ||
Weighted
average basic and diluted
common
shares outstanding
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5,380,259 | 3,535,197 | ||||||
Three
Months ended March 31,
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||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
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$ | (10,595,000 | ) | $ | (4,127,000 | ) | ||
Adjustments
to reconcile net loss to cash used
in
operating activities:
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||||||||
Depreciation
and amortization
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67,000 | 75,000 | ||||||
Stock
option expense
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57,000 | 292,000 | ||||||
Acquired in-process research and development | 8,879,000 | |||||||
Amortization
of debt costs and discounts
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- | 2,215,000 | ||||||
Change
in operating assets and liabilities:
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||||||||
Receivables
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35,000 | 3,000 | ||||||
Prepaid
expenses and other current assets
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(117,000 | ) | (74,000 | ) | ||||
Other
assets
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- | 1,000 | ||||||
Accounts
payable and accrued expenses
|
(1,250,000 | ) | 6,000 | |||||
Accrued
interest payable
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103,000 | 318,000 | ||||||
Deferred
revenues
|
(4,000 | ) | - | |||||
Net
cash used in operating activities
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(2,825,000 | ) | (1,291,000 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
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(22,000 | ) | (15,000 | ) | ||||
Somanta
acquisition, net of cash acquired
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(65,000 | ) | - | |||||
Redemptions
of short term investments and
certificates
of deposit
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599,000 | 471,000 | ||||||
Net
cash provided by investing activities
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512,000 | 456,000 | ||||||
Cash
flows from financing activities:
|
||||||||
Payments
of notes payable
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(64,000 | ) | - | |||||
Proceeds
from preferred stock issuances, net of costs
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2,444,000 | - | ||||||
Net
cash provided by financing activities
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2,380,000 | - | ||||||
Net
(decrease) increase in cash and cash equivalents
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67,000 | (835,000 | ) | |||||
Cash
and cash equivalents at beginning of period
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159,000 | 1,194,000 | ||||||
Cash
and cash equivalents at end of period
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$ | 226,000 | $ | 359,000 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
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$ | 5,000 | $ | 2,000 | ||||
Supplemental disclosure of noncash transactions; | ||||||||
Shares
issued for payables
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1,576,000 | - | ||||||
Preferred
stock dividends in accounts payable
|
525,000 | - | ||||||
Beneficial conversion feature
-
|
||||||||
February
2008 preferred stock dividends
|
857,000 | - | ||||||
November
2007 preferred stock dividends correction
|
451,000 | - | ||||||
Preferred
stock issuance costs paid in cash
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281,000 | - |
(1)
|
Interim
Financial Statements
|
March
31, 2008
|
December
31, 2007
|
|||||||||||||||
Gross
carrying
value
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Accumulated
amortization
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Gross
carrying
value
|
Accumulated
Amortization
|
|||||||||||||
Amortizable
intangible assets
Patents
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$ | 1,680 | $ | 1,013 | $ | 1,680 | $ | 970 | ||||||||
2008 | $ | 125 | ||
2009 | 168 | |||
2010 | 168 | |||
2011 | 168 | |||
2012 | 38 | |||
Total | $ | 667 |
·
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Approximately
1.5 million shares of Access common stock was issued to the common and
preferred shareholders of Somanta as consideration having a value of
approximately $4,650,000 (the value was calculated using Access’ stock
price on January 4, 2008 times the shares
issued);
|
·
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exchange
all outstanding warrants for Somanta common stock for warrants to purchase
191,991 shares of Access common stock at exercise prices ranging between
$18.55 and $69.57 per share. The warrants were valued at approximately
$281,000. All of the warrants are exercisable immediately and expire
approximately four years from date of issue. The weighted average fair
value of the warrants was $1.46 per share on the date of the grant using
the Black-Scholes pricing model with the following assumptions: expected
dividend yield 0.0%, risk-free interest rate 3.26%, expected volatility
114% and an expected term of approximately 4
years;
|
·
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paid
an aggregate of $475,000 in direct transaction costs;
and
|
·
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cancelled
receivable from Somanta of
$931,000.
|
Cash | $ | 1 | ||
Prepaid expenses | 25 | |||
Office equipment, net | 14 | |||
Accounts payable | (2,582 | ) | ||
In-process research & development | 8,879 | |||
$ | 6,337 |
Three Months Ended March
31,
|
||||||||
2008
|
2007
|
Net
loss
|
$ | (1,716 | ) | $ | (5,969 | ) | ||
Net
loss per common shares (basic and diluted)
|
$ | (0.32 | ) | $ | (1.19 | ) | ||
Weighted
average common shares outstanding
(basic
and diluted)
|
5,446 | 5,035 | ||||||
Quarter
ended
March
31, 2008
|
Quarter
ended
March
31, 2007
|
|||||||
Research
and development
|
$ | 13,000 | $ | 16,000 | ||||
General
and administrative
|
44,000 | 276,000 | ||||||
Stock-based
compensation expense
included
in operating expense
|
$ | 57,000 | $ | 292,000 |
3/31/07
|
||
Expected
life
|
4.3 yrs.
|
|
Risk
free interest rate
|
4.66
|
%
|
Expected
volatility(a)
|
137
|
%
|
Expected
dividend yield
|
0.0
|
%
|
(a)
|
Reflects
movements in our stock price over the most recent historical period
equivalent to the expected life.
|