þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware | 83-0221517 | |||
(State or other jurisdiction of | (I.R.S. Employer I.D. No.) | |||
incorporation or organization) |
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company þ
|
|||
(Do
not check if a smaller reporting
company)
|
ACCESS PHARMACEUTICALS, INC. | ||||
INDEX | ||||
Page No. | ||||
PART
I - FINANCIAL INFORMATION
|
||||
Item
1.
|
Financial
Statements:
|
|||
Condensed
Consolidated Balance Sheets at March 31, 2010
|
||||
(unaudited)
and December 31, 2009
|
12
|
|||
Condensed
Consolidated Statements of Operations (unaudited) for the
|
||||
three
months ended March 31, 2010 and March 31, 2009
|
13
|
|||
Condensed
Consolidated Statement of Stockholders’ Deficit
(unaudited)
|
||||
for
the three months ended March 31, 2010
|
14
|
|||
Condensed
Consolidated Statements of Cash Flows (unaudited) for the
|
||||
three
months ended March 31, 2010 and March 31, 2009
|
15
|
|||
Notes
to Unaudited Condensed Consolidated Financial Statements
|
16
|
|||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and
|
|||
Results
of Operations
|
2
|
|||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
7
|
||
Item
4T.
|
Controls
and Procedures
|
7
|
||
PART
II - OTHER INFORMATION
|
||||
Item
1.
|
Legal
Proceedings
|
8
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
8
|
||
Item
3.
|
Defaults
Under Senior Securities
|
8
|
||
Item
4.
|
Removed
and Reserved
|
9
|
||
Item
5.
|
Other
Information
|
9
|
||
Item
6.
|
Exhibits
|
9
|
||
SIGNATURES
|
11
|
|||
CERTIFICATIONS
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
·
|
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 $1
billion world-wide. MuGard, a proprietary nanopolymer formulation, has
received marketing allowance in the U.S. from the Food & Drug
Administration (FDA). MuGard has been launched in Germany, Italy, UK,
Greece and the Nordic countries by our European commercial partner,
SpePharm. Our manufacturing of MuGard is underway as we expect to launch
MuGard in North America during the second quarter of 2010. We are working
with our partners in Korea and China for
marketing.
|
·
|
Our
lead development candidate for the treatment of cancer is ProLindac™, a
nanopolymer DACH-platinum prodrug. We recently completed a Phase 2
clinical trial on ProLindac in the EU in patients with recurrent ovarian
cancer. The clinical study had positive safety and efficacy results. On
January 7, 2010, we announced that we are initiating a study of ProLindac
combined with Paclitaxel in second line treatment of platinum pretreated
advanced ovarian cancer patients. This multi-center study of up to 25
evaluable patients will be conducted in Europe. We are also currently
planning a number of combination trials, looking at combining ProLindac
with other cancer agents in solid tumor indications including colorectal
and 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.
|
·
|
Thiarabine,
or 4-thio Ara-C, is a next generation nucleoside analog licensed from
Southern Research Institute. Previously named SR9025 and OSI-7836, the
compound has been in two Phase 1/2 solid tumor human clinical trials and
was shown to have anti-tumor activity. We are working with leukemia and
lymphoma specialists at MD Anderson Cancer Center in Houston and intend to
initiate additional Phase 2 clinical trials in adult AML, ALL and other
indications.
|
·
|
Cobalamin™
is our proprietary preclinical nanopolymer oral drug delivery technology
based on the natural vitamin B12 oral uptake mechanism. We are currently
developing a product for the oral delivery of insulin, and have conducted
sponsored development of a product for oral delivery of human growth
hormone. We are in discussion with several companies regarding the
sponsored development of Cobalamin oral drug delivery formulations of
proprietary and non-proprietary
actives.
|
·
|
Cobalamin-mediated
cancer targeted delivery is a preclinical technology which makes use of
the fact that cell surface receptors for vitamins such as B12 are often
overexpressed by cancer cells. This technology uses nanopolymer constructs
to deliver more anti-cancer drug to tumors while protecting normal
tissues.
|
Compound
|
Originator
|
Technology
|
Indication
|
Clinical
Stage (1)
|
||||
MuGard™
|
Access
|
Mucoadhesive
liquid
|
Mucositis
|
(510k)
Marketing clearance received
|
||||
ProLindacTM
(Polymer
Platinate,
AP5346) (2)
|
Access
/
Univ
of
London
|
Synthetic
polymer
|
Cancer
|
Phase
2
|
||||
Thiarabine
(4-thio Ara-C) (3)
|
Southern
Research
Institute
|
Small
molecule
|
Cancer
|
Phase
1/2
|
||||
Oral
Insulin
|
Access
|
Cobalamin
|
Diabetes
|
Pre-clinical
|
||||
Oral
Delivery System
|
Access
|
Cobalamin
|
Various
|
Pre-clinical
|
||||
Cobalamin™-Targeted
Therapeutics
|
Access
|
Cobalamin
|
Anti-tumor
|
Pre-clinical
|
(1)
|
For
more information, see “Government Regulation” in our Annual Report on Form
10-K for description of clinical
stages.
|
(2)
|
Licensed
from the School of Pharmacy, The University of
London.
|
(3)
|
Licensed
from Southern Research Institute of Birmingham,
Alabama.
|
·
|
increased
costs for clinical development as we prepared to start our new ProLindac
combination therapy clinical
trial ($80,000);
|
·
|
increased
costs for our internal lab costs for various trials
($48,000);
|
·
|
increased
stock option expenses due to new employees
($36,000);
|
·
|
increased
salary and related costs due to a new employee
($33,000);
|
·
|
other
net increases in research spending
($31,000);
|
·
|
offset
by lower costs for product manufacturing for ProLindac which were higher
in 2009 ($65,000); and
|
·
|
offset
by lower scientific consulting expenses
($64,000).
|
·
|
lower
accrual of potential liquidated damages under an investor rights agreement
with certain investors
($158,000);
|
·
|
lower
general and administrative expenses incurred by MacroChem in the first
quarter of 2009 that are no longer ongoing
($135,000);
|
·
|
lower
general business consulting expenses
($110,000);
|
·
|
offset
by higher professional fees ($55,000);
and
|
·
|
other
net decreases in general and administrative expenses
($1,000).
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
ITEM
6.
|
EXHIBITS
|
2.2
|
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)
|
2.3
|
Agreement and Plan of Merger, by and among Access Pharmaceuticals,
Inc., MACM Acquisition Corporation and MacroChem Corporation, dated July
9, 2008.
|
3.1
|
Certificate
of Incorporation (Incorporated by Reference to Exhibit 3(a) of our Form
8-B dated July 12, 1989, Commission File Number
9-9134)
|
3.3
|
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)
|
3.4
|
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)
|
3.5
|
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)
|
3.6
|
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)
|
3.7
|
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)
|
3.8
|
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)
|
3.9
|
Amended
and Restated Bylaws (Incorporated by reference to Exhibit 3.1 of our Form
10-Q for the quarter ended June 30,
1996)
|
3.10
|
Certificate
of Designations, Rights and Preferences of Series A Cumulative Convertible
Preferred Stock (Incorporated by reference to Exhibit 3.10 to our Form
10-K for the year ended December 31,
2007)
|
3.11
|
Certificate
of Amendment to Certificate of Designations, Rights and Preferences of
Series A Cumulative Convertible Preferred Stock filed June 11, 2008 (Incorporated
by reference to Exhibit 3.11 of our Form 10-Q for the quarter ended June
30, 2008)
|
10.1
|
Form
of Securities Purchase Agreement (Incorporated by reference to Exhibit
10.29 of our Form S-1 filed on January 15,
2010)
|
10.2
|
Form
of Warrant (Incorporated by reference to Exhibit 10.30 of our Form S-1
filed on January 15, 2010)
|
10.3†
|
Employment
Agreement of David P. Nowotnik, PhD (Incorporated by reference to Exhibit
10.31 of our Form 8-K February 8,
2010)
|
31.1
|
Certification
of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to
Rule 13a-14(a)/15d-14(a)
|
31.2
|
Certification
of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to
Rule 13a-14(a)/15d-14(a)
|
32.1*
|
Certification
of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to 18
U.S.C. Section 1350
|
32.2*
|
Certification
of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to 18
U.S.C. Section 1350
|
Date:
|
May 17, 2010 |
|
By:
|
/s/ Jeffrey B. Davis |
|
|
Jeffrey
B. Davis
|
||||||
Chief
Executive Officer
|
||||||
(Principal
Executive Officer)
|
||||||
Date:
|
May 17, 2009 |
|
By:
|
/s/ Stephen B. Thompson |
|
|
Stephen
B. Thompson
|
||||||
Vice
President and Chief Financial Officer
|
||||||
(Principal
Financial and Accounting Officer
|
||||||
ASSETS
|
March 31, 2010
(unaudited)
|
December 31,
2009
|
|
Current
assets
Cash and cash
equivalents
Receivables
Prepaid expenses and other
current assets
|
$ 4,278,000
35,000
50,000
|
$ 607,000
36,000
42,000
|
|
Total current assets |
4,363,000
|
685,000
|
|
Property
and equipment, net
|
42,000
|
50,000
|
|
Patents,
net
|
734,000
|
787,000
|
|
Other
assets
|
56,000
|
61,000
|
|
Total
assets
|
$ 5,195,000
|
$ 1,583,000
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||
Current
liabilities
Accounts
payable
Accrued
expenses
Dividends
payable
Accrued
interest payable
Current
portion of deferred revenue
|
$ 3,859,000
857,000
3,254,000
232,000
347,000
|
$ 4,094,000
857,000
2,773,000
563,000
347,000
|
|
Total current liabilities |
8,549,000
|
8,634,000
|
|
Derivative
liability
Long-term
deferred revenue
Long-term
debt
|
6,831,000
4,644,000
5,500,000
|
9,708,000
4,730,000
5,500,000
|
|
Total
liabilities
|
25,524,000
|
28,572,000
|
|
Commitments
and contingencies
|
|||
Stockholders'
deficit
Convertible
Series A preferred stock - $.01 par value; authorized
2,000,000
shares; 2,985.3617 shares issued at March 31, 2010
and
2,992.3617 shares issued at December 31, 2009
Common
stock - $.01 par value; authorized 100,000,000 shares;
issued,
15,380,672 at March 31, 2010 and 13,171,545 at
December
31, 2009
Additional
paid-in capital
Notes
receivable from stockholders
Treasury
stock, at cost – 163 shares
Accumulated
deficit
|
-
154,000
221,726,000
(1,045,000)
(4,000)
(241,160,000)
|
-
132,000
215,735,000
(1,045,000)
(4,000)
(241,807,000)
|
|
Total stockholders' deficit |
(20,329,000)
|
(26,989,000)
|
|
Total liabilities and stockholders' deficit
|
$ 5,195,000
|
$ 1,583,000
|
Three Months ended March
31,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
||||||||
License
revenues
|
$ | 87,000 | $ | 41,000 | ||||
Royalties
|
15,000 | - | ||||||
Total revenues
|
102,000 | 41,000 | ||||||
Expenses
|
||||||||
Research and
development
|
786,000 | 687,000 | ||||||
General and
administrative
|
898,000 | 1,247,000 | ||||||
Depreciation and
amortization
|
61,000 | 66,000 | ||||||
Total
expenses
|
1,745,000 | 2,000,000 | ||||||
Loss
from operations
|
(1,643,000 | ) | (1,959,000 | ) | ||||
Interest
and miscellaneous income
|
4,000 | 14,000 | ||||||
Interest
and other expense
|
(149,000 | ) | (144,000 | ) | ||||
Gain
on change in fair value of derivative
|
2,877,000 | - | ||||||
2,732,000 | (130,000 | ) | ||||||
Net
income (loss)
|
1,089,000 | (2,089,000 | ) | |||||
Less
preferred stock dividends
|
442,000 | 480,000 | ||||||
Net
income (loss) allocable to common stockholders
|
$ | 647,000 | $ | (2,569,000 | ) | |||
Net
income (loss) per share
Basic
|
$
|
0.04
|
$
|
(0.24
|
)
|
|||
Diluted
|
$ |
0.04
|
$ |
(0.24
|
)
|
|||
Weighted
average number of common shares outstanding
Basic
|
14,766,947
|
10,497,219
|
||||||
Diluted |
17,756,979
|
10,497,219
|
Common Stock
|
Preferred Stock
|
Notes | ||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Additional
paid-in
capital
|
receivable
from stockholders
|
Treasury
stock
|
Accumulated
deficit
|
|||||||||||||||||||||||||
Balance
December 31, 2009
|
13,172,000 | $ | 132,000 | 2,992.3617 | $ | - | $ | 215,735,000 | $ | (1,045,000 | ) | $ | (4,000 | ) | $ | (241,807,000 | ) | |||||||||||||||
Restricted
common
stock
issued for services
|
73,000 | 1,000 | - | - | 17,000 | - | - | - | ||||||||||||||||||||||||
Warrants
issued for
services
|
- | - | - | - | 19,000 | - | - | - | ||||||||||||||||||||||||
Preferred
stock converted into common stock
|
23,000 | - | (7.0000 | ) | - | - | - | - | - | |||||||||||||||||||||||
Stock
option
compensation
expense
|
- | - | - | - | 114,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued
for
cash exercise of
options
|
10,000 | - | - | - | 14,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued
for
cashless warrant
exercise
|
20,000 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Common
stock issued
$3.00
share, net of costs
|
2,083,000 | 21,000 | - | - | 5,827,000 | - | - | - | ||||||||||||||||||||||||
Preferred
dividends
|
- | - | - | - | - | - | - | (442,000 | ) | |||||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | - | 1,089,000 | ||||||||||||||||||||||||
Balance
at March 31, 2010
|
15,381,000 | $ | 154,000 | 2,985.3617 | $ | - | $ | 221,726,000 | $ | (1,045,000 | ) | $ | (4,000 | ) | $ | (241,160,000 | ) |
Three Months ended March
31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | 1,089,000 | $ | (2,089,000 | ) | |||
Adjustments to
reconcile net income (loss) to cash used
in
operating activities:
|
||||||||
Gain on change in fair value of
derivative
|
(2,877,000 | ) | - | |||||
Depreciation and
amortization
|
61,000 | 66,000 | ||||||
Stock option compensation
expense
|
114,000 | 56,000 | ||||||
Stock and warrants issued for
services
|
37,000 | 157,000 | ||||||
Change in operating assets and
liabilities:
|
||||||||
Receivables
|
1,000 | 17,000 | ||||||
Prepaid
expenses and other current assets
|
(8,000 | ) | 49,000 | |||||
Other
assets
|
5,000 | 4,000 | ||||||
Accounts
payable and accrued expenses
|
(235,000 | ) | (157,000 | ) | ||||
Dividends
payable
|
39,000 | (149,000 | ) | |||||
Accrued
interest payable
|
(331,000 | ) | 132,000 | |||||
Deferred
revenue
|
(86,000 | ) | 1,442,000 | |||||
Net cash used in operating
activities
|
(2,191,000 | ) | (472,000 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
- | (2,000 | ) | |||||
Proceeds from sale of
asset
|
- | 1,000 | ||||||
Net cash used in investing
activities
|
- | (1,000 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds from exercise of
stock options
|
14,000 | - | ||||||
Proceeds
from common stock issuances, net of costs
|
5,848,000 | - | ||||||
Net cash provided by financing
activities
|
5,862,000 | - | ||||||
Net
increase (decrease) in cash and cash equivalents
|
3,671,000 | (473,000 | ) | |||||
Cash
and cash equivalents at beginning of period
|
607,000 | 2,679,000 | ||||||
Cash
and cash equivalents at end of period
|
$ | 4,278,000 | $ | 2,206,000 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 440,000 | $ | - | ||||
Supplemental
disclosure of noncash transactions:
|
||||||||
Shares issued for payables,
notes payable and accrued interest
|
- | 859,000 | ||||||
Shares issued for dividends on
preferred stock
|
- | 856,000 | ||||||
Preferred
stock dividends in dividends payable
|
442,000 | 480,000 | ||||||
(1)
|
Interim
Financial Statements
|
March
31, 2010
|
December
31, 2009
|
|||
Gross
carrying
value
|
Accumulated
amortization
|
Gross
carrying
value
|
Accumulated
Amortization
|
|
Amortizable
intangible assets
Patents
|
$ 2,624
|
$ 1,890
|
$ 2,624
|
$ 1,837
|
2010 | $ 159 | |
2011 | 212 | |
2012 | 82 | |
2013 | 44 | |
2014 | 44 | |
over 5 years | 193 | |
Total | $ 734 |
·
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities.
|
·
|
Level
2 – Observable inputs other than quoted prices included in Level 1, such
as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be
corroborated by observable market
data.
|
·
|
Level
3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets and liabilities.
This includes certain pricing models, discounted cash flow methodologies
and similar valuation techniques that use significant unobservable
inputs.
|
(in
thousands)
|
March
31, 2010
|
December
31, 2009
|
||||
Level
1
|
Level
2
|
Total
|
Level
1
|
Level
2
|
Total
|
|
Assets:
|
||||||
Cash
|
$4,278
|
$ -
|
$4,278
|
$607
|
$ -
|
$ 607
|
Liabilities:
|
||||||
Derivative
liability
|
$ -
|
$6,831
|
$6,834
|
$ -
|
$9,708
|
$9,708
|
Three
months ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
Research
and development
|
$ | 73,000 | $ | 36,000 | ||||
General
and administrative
|
41,000 | 20,000 | ||||||
Stock-based
compensation expense
included
in operating expense
|
$ | 114,000 | $ | 56,000 |
3/31/10
|
|||
Expected
life
|
5.97
yrs
|
||
Risk
free interest rate
|
2.4
|
%
|
|
Expected
volatility(a)
|
118
|
%
|
|
Expected
dividend yield
|
0.0
|
%
|
|
(a)
|
Reflects
movements in our stock price over the most recent historical period
equivalent to the expected life.
|
(in
thousands, except share and per share amounts)
|
Three
months ended
March
31,
|
|||||||
2010
|
2009
|
|||||||
Net
income (loss)
|
$ | 647 | $ | (2,569 | ) | |||
Weighted
average shares outstanding
|
14,766,947 | 10,497,219 | ||||||
Basic
net income (loss) per common share
|
$ | 0.04 | $ | (0.24 | ) | |||
Net
income (loss)
|
$ | 647 | $ | (2,569 | ) | |||
Weighted
average shares outstanding
|
14,766,947 | 10,497,219 | ||||||
Effect
of dilutive options and warrants
|
2,990,032 | - | ||||||
Weighted
average shares outstanding assuming dilution
|
17,756,979 | 10,497,219 | ||||||
Diluted
net income (loss) per common share
|
$ | 0.04 | $ | (0.24 | ) | |||
Three
months ended
March
31,
|
||||||||
2010
|
2009
|
|||||||
Warrants
|
6,124,749 | 9,564,570 | ||||||
Stock options | 886,404 | 1,354,820 | ||||||
Convertible
note
|
200,000 | 200,000 | ||||||
Preferred
stock
|
9,951,198 | 9,974,539 | ||||||
Total
|
17,162,351 | 21,093,929 | ||||||