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x		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)
	2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
	(Address of principal executive offices)
	(214) 905-5100
	(Registrant’s telephone number, including area code)

 

 

 

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
		(Do not check if a smaller reporting company)

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

●

MuGard™ is our marketed 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 $2.1 billion world-wide. MuGard, a proprietary nanopolymer formulation, has received marketing allowance in the U.S. from the FDA. We launched MuGard in the U.S. in the fourth quarter of 2010. We are continuing the training of our third-party MuGard representatives on the product, the oral mucositis condition and our sales strategy. MuGard prescriptions are growing quarterly and we have placed emphasis on our sampling and marketing efforts to build demand, grow oncologist awareness and increase payer uptake. Our China partners have received an acceptance letter from the State Food and Drug Administration of the People’s Republic of China which provides marketing approval in China. MuGard has been manufactured in the U.S. and shipped to China for sale. Our China partners anticipate that sales of MuGard will begin in China in the second quarter of 2013. We are actively seeking partners to license MuGard.

 

·●

Our candidate for the treatment of cancer is ProLindac™, a nanopolymer Diamino Cyclohexane (“DACH”)-platinum prodrug. ProLindac is in Phase 2 of clinical development, and we have completed and evaluated data from several clinical trials with ProLindac. No additional trials have been initiated this year in the U.S. or in Europe as the Company is focusing its resources on growing sales of MuGard. We are working with our partners in China towards the initiation of clinical trials of ProLindac in China. Clinical studies of other indications including liver, colorectal and ovarian cancer are under consideration by Jiangsu Aosaikang Pharmaceutical Co., Ltd, our licensee for ProLindac in China. The DACH-platinum incorporated in ProLindac is the same active moiety as that in oxaliplatin (e.g. Eloxatin; Sanofi-Aventis), which has had annual sales in excess of $2.0 billion. We are currently seeking partners to license this technology.

 

●

CobOral® is our proprietary preclinical nanopolymer oral drug delivery technology based on the natural vitamin B12 oral uptake mechanism. We have been developing a product for the oral delivery of insulin, and have conducted sponsored development of a product for oral delivery of a number of peptides and RNAi therapeutics. We are currently seeking partners to license this technology.

 

●

CobaCyte®-mediated targeted delivery is a preclinical technology that makes use of the fact that cell surface receptors for vitamins such as B12 are often overexpressed by certain cells including many cancers. This technology uses nanopolymer constructs to deliver more anti-cancer drug to tumors while protecting normal tissues. We are currently seeking partners to license this technology.

 

 

 

 

 

 

Compound		Originator		Technology		Indication		Clinical Stage (1)
MuGard™		Access		Mucoadhesive liquid		Mucositis		Launched   U.S. and EU Regulatory   Approval   China
ProLindacTM (Polymer    Platinate, AP5346)  (2)		Access / Univ of London		Synthetic polymer		Cancer		Phase 2
Oral Insulin		Access		Cobalamin		Diabetes		Pre-clinical
CobOral® Delivery System		Access		Cobalamin		Various		Pre-clinical
CobaCyte®-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.

 

 

 

 

 

 

 

 

 

 

 

·	decreased salary and related costs ($265,000) from reduced scientific staff;

·	decreased clinical development with trials for ProLindac and Thiarabine ($99,000);

·	decreased stock compensation expense from lower expense of option grants for research and development employees ($32,000); and

·	other net decreases in research spending ($31,000).

 

 

 

·	decreased salary and related costs ($216,000) from reduced general and administrative staff;

·	lower patent fees ($55,000) due to no new patents being filed in 2013;

·	decreased director fees ($45,000) due to the fact that 2012 fees were paid in stock because directors had not been paid fees for several years;

·	decreased general business consulting expenses due to less use of outside consultants in 2013 ($31,000) versus the same period  in 2012;

·	decreased net other general and administrative expenses ($73,000); and

·	increased MuGard product selling expenses ($95,000).

 

 

 

 

 

 

 

 

 

 

 

 

·

Wholesaler and Specialty and Retail Pharmacy Discounts – we offer contractually determined discounts to certain wholesale distributors and specialty and retail pharmacies that purchase directly from us. These discounts are either taken off the invoice at the time of shipment or paid to the customer on a monthly or quarterly basis.

·	Prompt Pay Discounts – we offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. Based on our experience many of the customers comply with the payment terms to earn the cash discount.

·	Patient Discount Programs – we offer discount programs in which patients receive certain discounts off their prescription.

·	Managed Care Rebates – we offer discounts under contracts with certain managed care providers who do not purchase directly from us.

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

 

 

 

 

 

 

results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.

 

ITEM 1.

LEGAL PROCEEDINGS.

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

 

Pursuant to the terms of the Certificate of Designations, Rights and Preferences of our Series B Preferred Stock, we are required to pay dividends in cash or shares of our common stock, semi-annually, at the rate of 12% per annum. The Company has accrued as of March 31, 2013, dividends payable in the aggregate amount of $4,256,000.

ITEM 6.

EXHIBITS.

 

Exhibits:

 

31.1	Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2	Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1*

Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2*

Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS

XBRL Instance Document**

 

101.SCH

XBRL Taxonomy Schema**

 

101.CAL

XBRL Taxonomy Calculation Linkbase Document**

 

101.DEF

XBRL Taxonomy Definition Linkbase Document**

 

101.LAB

XBRL Taxonomy Label Linkbase Document**

 

101.PRE

XBRL Taxonomy Presentation Linkbase Document**

 

 

 

 

 

 

 

Date:	May 15, 2013		By:	/s/ Jeffrey B. Davis
				Jeffrey B. Davis
				Chief Executive Officer
				(Principal Executive Officer)
Date:	May 15, 2013		By:	/s/ Stephen B. Thompson
				Stephen B. Thompson
				Vice President and Chief Financial Officer
				(Principal Financial and Accounting Officer)

 

 

 

 

	March 31, 2013			December 31, 2012
ASSETS	(unaudited)
Current assets
Cash and cash equivalents    Receivables Inventory Prepaid expenses and other current assets		$               50,000 1,231,000 150,000 242,000			$             396,000 840,000 194,000              251,000
Total current assets		1,673,000			1,681,000
Property and equipment, net	6,000			7,000
Other assets		42,000			42,000
Total assets		$                     1,721,000			$                  1,730,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable   Accrued expenses   Dividends payable   Current portion of deferred revenue		$          2,385,000 857,000 4,256,000 247,000			$          2,039,000 857,000 3,486,000 247,000
Total current liabilities		7,745,000			6,629,000
Derivative liability - warrants Derivative liability - preferred stock Long-term deferred revenue		518,000 4,420,000 2,644,000			271,000 9,200,000 2,706,000
Total liabilities		15,327,000			18,806,000
Commitments and contingencies
Stockholders' deficit   Convertible preferred stock Series A - $.01 par value; authorized       2,000,000 shares; 2,913.3617 shares issued at March 31,  2013 and 2,913.3617 shares issued at December 31, 2012   Convertible preferred stock Series B - $.01 par value; authorized       2,000,000 shares; 1,000.0 shares issued at March 31,  2013 and 1,000.0 shares issued at December 31, 2012   Common stock - $.01 par value; authorized 100,000,000 shares;      issued, 24,833,855 at March 31, 2013 and 24,732,312 at      December 31, 2012   Additional paid-in capital   Treasury stock, at cost – 163 shares   Accumulated deficit		-     -     248,000 250,768,000 (4,000) (264,618,000)			-     -     247,000 250,653,000 (4,000) (267,972,000)
Total stockholders' deficit		(13,606,000)			(17,076,000)
Total liabilities and stockholders' deficit		$                     1,721,000			$                  1,730,000

 

 

 

 

		Three Months ended March 31,
		2013				2012
Revenues
Product sales		$	1,162,000			$	554,000
License revenues			62,000				1,262,000
Royalties			-				21,000
Total revenues			1,224,000				1,837,000
Expenses
Research and development			323,000				750,000
Product costs			65,000				59,000
Selling, general and administrative			1,338,000				1,663,000
Depreciation and amortization			1,000				54,000
Total expenses			1,727,000				2,526,000
Loss from operations			(503,000	)			(689,000	)
Interest and miscellaneous income			94,000				1,000
Interest and other expense			(43,000	)			(169,000	)
Warrant extension expense			-				(2,316,000	)
(Loss) gain on change in fair value of derivative – warrants			(247,000	)			741,000
Gain (loss) on change in fair value of derivative –      preferred stock			4,780,000				(2,460,000	)
			4,584,000				(4,203,000	)
Net income (loss)			4,081,000				(4,892,000	)
Less preferred stock dividends			727,000				440,000
Net income (loss) allocable to common stockholders		$	3,354,000			$	(5,332,000	)
Net income (loss) per common share
Basic		$	0.14			$	(0.22	)
Diluted		$	0.13			$	(0.22	)
Weighted average number of common shares outstanding
Basic			24,800,936				24,145,488
Diluted			25,156,201				24,145,488

 

 

 

 

 

 

 

 

 

 

		Common Stock								Preferred Stock – A								Preferred Stock – B
		Shares				Amount				Shares				Amount				Shares				Amount				Additional paid-in capital				Treasury stock				Accumulated deficit
Balance  December 31, 2012			24,732,312			$	247,000				2,913.3617			$	-				1,000.0			$	-			$	250,653,000			$	(4,000	)		$	(267,972,000	)
Common stock  issued for services			28,043				-				-				-				-				-				10,000				-				-
Common stock  issued to employees			73,500				1,000				-				-				-				-				28,000				-				-
Stock option comp-  ensation expense			-				-				-				-				-				-				77,000				-				-
Preferred dividends			-				-				-				-				-				-				-				-				(727,000	)
Net income			-				-				-				-				-				-				-				-				4,081,000
Balance  March 31, 2013			24,833,855			$	248,000				2,913.3617			$	-				1,000.0			$	-			$	250,768,000			$	(4,000	)		$	(264,618,000	)

 

 

 

 

 

		Three Months ended March 31,
		2013				2012
Cash flows from operating activities:
Net income (loss)		$	4,081,000			$	(4,892,000	)
Adjustments to reconcile net loss to cash used               in operating activities:
Gain (loss) on change in fair value of derivative - warrants			247,000				(741,000	)
Gain (loss) on change in fair value of derivative – preferred stock			(4,780,000	)			2,460,000
Warrant extension expense							2,316,000
Depreciation and amortization			1,000				54,000
Stock option compensation expense Stock issued to directors and employees			77,000 29,000				114,000 302,000
Stock issued for services			10,000				30,000
Change in operating assets and liabilities:
Receivables			(391,000	)			(601,000	)
Inventory			44,000				54,000
Prepaid expenses and other current assets			9,000				(4,000	)
Other assets			-				4,000
Accounts payable and accrued expenses			346,000				165,000
Interest payable on dividends			43,000				86,000
Accrued interest payable			-				83,000
Deferred revenue			(62,000	)			(512,000	)
Net cash used in operating activities			(346,000	)			(1,082,000	)
Cash flows from investing activities:
Capital expenditures			-				(13,000	)
Net cash used in investing activities			-				(13,000	)
Net increase (decrease) in cash and cash equivalents			(346,000	)			(1,095,000	)
Cash and cash equivalents at beginning of period			396,000				2,460,000
Cash and cash equivalents at end of period		$	50,000			$	1,365,000
Supplemental cash flow information:
Cash paid for interest		$	-			$	-
Supplemental disclosure of noncash transactions:
Shares issued for dividends on preferred stock			-				13,000
Preferred stock dividends in dividends payable		$	727,000			$	440,000

 

 

 

 

 

(1)	Interim Financial Statements

 

 

 

 

 

 

 

(2)

Liquidity

 

 

(3)	Fair Value of Financial Instruments

 

 

 

·	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)
Description		As of March 31, 2013				Level 1				Level 2				Level 3				Total Gains (Losses)
Liabilities:   Derivative liability-
warrants		$	518			$	-			$	518			$	-			$	(247	)
preferred stock		$	4,420			$	-			$	-			$	4,420			$	4,780

 

(in thousands)
Description		As of December 31, 2012				Level 1				Level 2				Level 3				Total Gains (Losses)
Liabilities:   Derivative liability-
warrants		$	271			$	-			$	271			$	-			$	1,236
preferred stock		$	9,200			$	-			$	-			$	9,200			$	(4,770	)

 

 

(4)	Stock Based Compensation

 

 

 

		Three months ended March 31,
		2013				2012
Research and development		$	9,000			$	42,000
Selling, general and administrative			68,000				72,000
Stock-based compensation expense    included in operating expense		$	77,000			$	114,000

 

 

For the three months ended March 31, 2013 and 2012, stock valued at $29,000 and $302,000, respectively, was granted to directors and officers.

 

(5)	Litigation

 

 

 

(6)	Basic and Diluted Net Income (Loss) Per Common Share

 

 

 

(in thousands, except share and per share amounts)		Three months ended March 31,
		2013				2012
Net income (loss)		$	3,354			$	(5,332	)
Weighted average shares outstanding			24,800,936				24,145,488
Basic net income (loss) per common share		$	0.14			$	(0.22	)
Net income (loss)		$	3,354			$	(5,332	)
Weighted average shares outstanding			24,800,936				24,145,488
Effect of dilutive options and warrants			355,265				-
Weighted average shares outstanding assuming dilution			25,156,201				24,145,488
Diluted net income (loss) per common share		$	0.13			$	(0.22	)