Notice of Forward-Looking Statement
Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance, or
achievements of Enochian Biosciences Inc. ("Enochian", and together with its
subsidiaries, the "Company", "we" or "us") to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. Our
actual future results and trends may differ materially depending on a variety of
factors, including, but not limited to, the risks and uncertainties discussed in
Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K as filed with
the SEC on September 24, 2021. The Company's plans and objectives are based, in
part, on assumptions involving the continued expansion of the business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes its assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and, therefore, there
can be no assurance the forward-looking statements included in this Quarterly
Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
Our Business
We are a pre-clinical stage biotechnology company committed to using our
genetically modified cell, gene, and immune therapy technologies to potentially
prevent or cure HIV, HBV, influenza and coronavirus infections, as well as to
provide potentially long-term or life-long cancer remission in some of the
deadliest cancers.
Over the past several years, Enochian Biosciences Inc. has expanded the pipeline
from a single potential cure for HIV (autologous transplantation with
gene-modified cells; ENOB-HV-01) to three additional potential cures for HIV, a
potential cure for Hepatitis B Virus (HBV), potential inhaled treatment and
prophylaxis/prevention of all variants of SARS-CoV-1 and -2 (the cause of the
COVID-19 pandemic), and potential cures for many solid tumors, beginning with
pancreatic cancer.
Our integrated platforms encompass innovative interventions in gene and immune
therapies that provide hope for cures or life-long remissions for devastating
diseases. Our platforms can potentially streamline and accelerate pre-clinical,
regulatory, clinical, and production pathways. Because of the relative ease of
administration, our potentially groundbreaking interventions could be used
throughout the world. Platforms: Hijack RNA Our novel approach tricks the virus into sending suicide signals to the infected cell instead of turning the cell into a virus factory. The technology is delivered by vectors that would allow it to rapidly treat an infection, or to lay and wait in ambush until a cell becomes infected, which would prevent (prophylaxis, similar to taking drugs to protect from becoming infected with malaria or HIV) future infections.
The delivery mechanism can be adapted for aerosols (eg, respiratory infections like the virus that causes COVID-19 and influenza), intravenous or other delivery mechanisms (eg, for hepatitis B virus and HIV).
Allogeneic Cell Therapy
The human immune system is designed to recognize “self” and destroy “otherness” or “non-self”, such as bacteria, viruses and cancer cells.
22 Alloreactivity (reacting against another person's cells) is the most powerful response the immune system generates. Several of our technologies take advantage of the alloreactivity to hyperstimulate a person's immune response to better attack a chronic infection (e.g. HIV) or solid tumors. In certain treatments (e.g. HIV and cancer), cells taken from healthy donors are sometimes genetically modified to further boost the immune system to seek and kill diseases. In addition to those platforms, Enochian Biosciences has an innovative approach to remove cells from a person living with HIV and genetically modify them so they cannot be infected with HIV. The unique innovation is an additional genetic alteration to increase the ability of those cells to survive and expand when they are given back to the same person (autologous transplantation). Respiratory Diseases
In April 2021, Enochian Biosciences acquired the exclusive license for pan-SARS-Cornavirus-1 and-2 (SARS-CoV) and pan-Influenza inhalation treatment and prophylaxis.
SARS-CoV-2 has caused the most devastating global pandemic in a century - COVID-19. Using the Hijack RNA platform technology, in vitro and in vivo results showing rapid killing of infected cells, but not uninfected cells were presented at the important Conference on Retroviruses and Opportunistic Infections in March 2021. Since that time, there has been substantial progress with a Pre-IND (as defined below) submission expected in the near term. Influenza has caused dozens of major global pandemics; the most notable in 1918 that killed 50 to 100 million people. There was an H1N1 threat as recently as 2009. The Hijack RNA also has shown promising in vitro results that were presented at the Annual Conference of the American Society of Gene and Cell Therapy (ASGCT) in May 2020.
A leading scientist and public health expert is part of our Scientific Advisory Board focused on respiratory diseases.
Human Immunodeficiency Virus (HIV) and Acquired Immunodeficiency Syndrome (AIDS)
HIV attacks the human immune system, specifically killing CD4+ cells, or T cells, which play a central checkpoint role in the immune system. Untreated, HIV dramatically reduces the number of T cells in the body, devastates the immune system, leading to AIDS, a disease in which the immune system cannot fight life-threatening infections and cancers.
Currently there are over 30 antiretroviral drugs, or ART, approved by the U.S.
Food and Drug Administration ("FDA") to treat HIV but these drugs are expensive,
require daily adherence, and can have significant side effects over time. In
addition, on a global basis, as many as 1 million people, including persons in
high-income countries, continue to die each year from HIV/AIDS due to
drug-resistant HIV or lack of access to treatment. To date, there are no
treatments that can eliminate the reservoir of immune cells that are infected
with HIV from the body. Consequently, treatment for HIV is life-long.
There have been several efforts to cure HIV by re-engineering a person's own
T-cells so that these cells no longer express a special protein (C-C chemokine
co-receptor type 5 or CCR5), which HIV uses to gain entry to them. A naturally
occurring mutation that blocks expression of CCR5 on T cells occurs in ~1% of
persons living in or from Northern Europe with no known adverse effects. The
"Berlin patient", and more recently the "London patient" were HIV-positive
persons who developed cancer and were treated with a bone marrow transplant with
cells donated from persons with this naturally occurring mutation of CCR5. The
Berlin and London patients seem to have been effectively cured from HIV
providing proof-of-concept that HIV can be cured. However, because the
transplanted cells come from another person, such transplants carry high risk
and can result in death in a significant proportion of patients. Given the
success with these two patients, several researchers and companies have
attempted to replicate this experience by genetically modifying T cells of
HIV-positive patients to render them unable to be infected by HIV and then
returning them to the patient. Because the transplanted cells are from the same
person, the risks to the patient are much lower. The uptake, or engraftment of
the modified T cells, however, has not been optimal, leading to failure to
achieve a cure. In addition, the transplant pre-treatment that has been used is
bone marrow-destroying chemotherapy, which wipes out the patient's immune system
and can have long-term side effects including the risk of developing cancer.
23
ENOB-HV-01 is a novel, proprietary approach with the potential to overcome the failures of recent efforts to develop a cure for HIV. The intervention provides gene-modified T cells with a competitive advantage over non-modified cells in the HIV-positive person, with the potential to significantly increase engraftment; and avoid the need for chemotherapy that substantially depletes the bone marrow and could potentially be given as an outpatient treatment. The Company met with the FDA INTERACT team on June 2, 2020. INTERACT is the first available FDA interaction and is a key step in the process towards a potential Investigational New Drug Application (IND) to study First-in-Human products potentially leading to marketing authorization via Biologics License Application (BLA). The FDA Center for Biologics Evaluation and Research (CBER) has numerous INTERACT requests and grants meetings that are deemed appropriate for this early FDA engagement. The Enochian management team considered the meeting to be successful with strong alignment between Enochian's approach to developing ENOB-HV-01 and the comments of the FDA reviewers.
The first scientific results of a mouse study on the ENOB-HV-01 approach were presented at the ASCGT annual conference in May 2020.
We are also developing ENOB-HV-11 and ENOB-HV-12 that will utilize a novel cellular- and immunotherapy approach that could potentially provide both preventative and therapeutic vaccines for HIV. A non-human primate study is in process and on schedule. Preliminary results could potentially be available
by the latter part of 2022. Our co-founder and inventor, Dr. Serhat Gümrükcü, who is also the Director of Seraph Research Institute (SRI), submitted Pre-IND for ENOB-HV-21, an innovative treatment of Natural Killer (NK) and Gamma Delta T-Cells (GDT) collected from another person. It is believed that the GDT cells, a small subset of immune cells that can be infected with HIV, could be a key factor in controlling the virus. The initial scientific findings were presented during the ASCGT Conference this past May. Enochian Biosciences has an exclusive license to use the underlying patent to develop ENOB-HV-21 for the prevention, treatment, and/or amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans.
We are in the development phase of additional product candidates related to our HIV pipeline. ENOB-HV-31, which is an in vivo gene therapy, and ENOB-HV-32, which is a peptide drug for packaging and delivery.
Hepatitis B (HBV) Despite the availability of an effective vaccine and treatment that can control infection if it is taken daily for life, hepatitis B virus (HBV) is the world's most common serious liver infection. While vaccines are increasingly required for children, many adults have not been vaccinated. Life-long treatment can be difficult for certain people and access can be limited. In that regard, HBV remains the leading cause of liver cancer and the second leading cause of cancer deaths in the world. Two billion people have been infected with HBV, approximately 350 million have chronic HBV infection, and nearly one million people die every year. Current efforts to develop novel treatment or cure largely focus on approaches to deplete the pool of a certain type of HBV DNA. Enochian Biosciences has collaborated with SRI to develop an innovative approach to co-opt HBV polymerase, a key expanding factor that the virus needs to reproduce itself, to induce the death of liver cells infected with the virus. On July 27, 2020, Enochian Biosciences announced the creation of an HBV Scientific Advisory Board comprised of distinguished leaders in HBV disease, treatment and cure. On August 23, 2021, we announced the addition of a third leading expert with substantial experience in HBV clinical trials. On September 27, 2021, the Company announced the completion of a Pre-Investigational New Drug (IND) process following receipt of written comments from the U.S. Food and Drug Administration (FDA) Center for Biologics Evaluation and Research (CBER) Office of Tissues and Advanced Therapies (OTAT) for ENOB-HB-01. 24 The initial in vitro and in vivo work was presented at the biannual HEP DART meeting in December of 2019, where it was selected as one of the best new therapies/novel strategies. Additional data was presented at the annual ASCGT conference in May 2020. A proof-of-concept, in vivo cure study is in advanced stages. A Pre-IND request has been completed with productive comments and insights. An IND could potentially be submitted towards the end of 2022 with potential for enrollment in a clinical trial to begin by the end of 2022 or
in 2023. Cancer
Based on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform that could potentially be used to induce life-long remissions from some of the deadliest solid tumors. Initial preclinical in vitro studies have been encouraging. We initially plan to target pancreatic cancer, triple-negative breast cancer, glioblastoma, and renal cell carcinoma. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. As with HIV, our approach would potentially allow for outpatient therapy without ablating or significantly impairing the patient's immune system, as many current approaches require. Through a collaboration with a leader in the field of pancreatic cancer, our first cancer-related therapeutic target, we are developing the pipeline with in vitro and in vivo proof-of-concept studies to evaluate the potential to induce long-term remission or cure. Results are expected in first half 2022. If the results are promising, a potential Pre-IND and an IND with potential for enrollment in a clinical trial maybegin in 2022. To date, our operations have been funded by sales of our securities and the issuance of debt. We have never generated any sales revenue, and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may
never be profitable. Corporate History On February 16, 2018, we completed our acquisition of Enochian Biopharma pursuant to an acquisition agreement, dated January 12, 2018, by and among the Registrant, its wholly owned subsidiary DanDrit Acquisition Sub, Inc., Enochian Biopharma and Weird Science with Enochian Biopharma surviving as a wholly owned subsidiary of the Registrant. As consideration for the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock and (ii) the right to receive contingent shares pro rata upon the exercise or conversion of warrants, which were outstanding at closing (see Note 7.)
COVID-19 The COVID-19 pandemic continues to evolve, and to date has led to the implementation of various mitigation responses, including government-imposed quarantines, travel restrictions and other public health safety measures, as well as leading to reported adverse impacts on healthcare resources, facilities and providers across the United States and in other countries. COVID-19 may cause delays in our research activities. To date, it has not materially affected our operations; however it has caused delays in the conduct of experiments due to limitations of various organizations, in particular those conducting experiments related to COVID-19. There have also been increases in the cost to conduct animal studies due to staffing and other limitations. The full extent to which the COVID-19 pandemic may impact our business and operations is subject to future developments, which are uncertain and difficult to predict. Further quarantines, shelter-in-place or similar restrictions and other actions taken or imposed by foreign, federal, state and local governments could adversely impact our or our partners' clinical, research and development, regulatory and manufacturing operations or timelines. We continue to monitor the impact of the COVID-19 pandemic on our business and operations and will seek to adjust our activities as appropriate. In addition, the pandemic could result in significant and prolonged disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect the financial resources available to us. 25
Results of operations for the three and six months ended December 31, 2021
compared to the three and six months ended December 31, 2020
The following table sets forth our revenues, expenses and net loss for the
three and six months ended December 31, 2021 and 2020. The financial information
below is derived from our unaudited condensed consolidated financial statements.
For the Three Months Ended For the Six Months Ended
December 31, Increase/(Decrease) December 31, Increase/(Decrease)
2021 2020 $ % 2021 2020 $ %
Operating Expenses
General and administrative
expenses 4,154,901 1,939,988 2,214,913 114 % 8,621,598 3,717,911 4,903,687 132 %
Research and development
expenses 2,144,085 1,334,468 809,617 61 % 5,150,328 2,384,844 2,765,484 116 %
Depreciation and amortization 31,805 30,760
1,045 3 % 63,538 61,218 2,320 4 % Total Operating Expense $ 6,330,791 $ 3,305,216 $ 3,025,575 92 % $ 13,835,464 $ 6,163,973 $ 7,671,491 124 % LOSS FROM OPERATIONS $ (6,330,791 ) $ (3,305,216 ) $ (3,025,575 ) 92 % $ (13,835,464 ) $ (6,163,973 ) $ (7,671,491 ) 124 % Other Income (Expense) Change in fair value of contingent consideration (167,255 ) 493,411 (660,666 ) (134 )% (2,991,897 ) 920,811 (3,912,708 ) (425 )% Interest expense (93,382 ) (93,426 ) 44 - % (183,121 ) (185,739 ) 2,618 (1 )% Gain (Loss) on currency transactions - (32,289 ) 32,289 100 % 9 (32,289 ) 32,298 100 % Interest income 8,487 3,066 5,421 177 % 15,597 7,372 8,225 112 %
Total Other (expense) income (252,150 ) 370,762 (622,912 ) (168 )% (3,159,412 ) 710,155 (3,869,567 ) (545 )% Loss Before Income Taxes $ (6,582,941 ) $ (2,934,454 ) $ (3,648,487 ) 124 % $ (16,994,876 ) $ (5,453,818 ) $ (11,541,058 ) 212 % Income Tax Benefit $ - $ 1,158 $
(1,158 ) (100 )% $ (34 ) $ 123,952 $ (123,986 ) (100 )% NET LOSS $ (6,582,941 ) $ (2,933,296 ) $ (3,649,645 ) 124 % $ (16,994,910 ) $ (5,329,866 ) $ (11,665,044 ) 219 % Revenues
We are a pre-clinical and pre-revenue biotechnology company. We have never generated income and suffered losses since our establishment. We do not anticipate revenue until our therapies or products have been approved for marketing and sale.
Expenses Our operating expenses for the three months ended December 31, 2021, and December 31, 2020 were $6,330,791 and $3,305,216 respectively, representing an increase of $3,025,575, or approximately 92%. The increase in operating expenses primarily relate to general and administrative expenses. Our operating expenses for the six months ended December 31, 2021, and December 31, 2020, were $13,835,464 and $6,163,973, respectively, representing an increase of $7,671,491 or approximately 124%. The change is primarily related to the increase in general and administrative expenses of $4,903,687, and an increase in R&D expenses of $2,747,984. 26
General and administrative expenses for the three months ended December 31, 2021, and December 31, 2020, were $4,154,901 and $1,939,988, respectively, representing an increase of $2,214,914 or approximately 114%. The variance is primarily related to an increase in stock-based compensation of $1,683,901, an increase in compensation and related expenses of $301,743, and an increase
in lab expenses of $160,618. General and administrative expenses for the six months ended December 31, 2021, and December 31, 2020, were $8,621,598 and $3,717,911, respectively, representing an increase of $4,903,687 or approximately 132%. The largest contributors to the increase in general and administrative expenses were the increases in stock-based compensation of $4,085,720, officer compensation of $436,062, salaries expense of $196,065, laboratory expenses of $171,847, and recruiting expenses of $117,233, offset by a decrease in security expenses
of
$139,175.
Research and development expenses for the three months ended December 31, 2021,
and December 31, 2020, were $2,144,085 and $1,334,468, respectively,
representing a decrease of $809,617 or approximately 61%. The variance is
primarily driven by $684,939 contract development and manufacturing
company ("CDMO") partner expenses related to CV-01, $75,000 related to COVID
license payments that were not established in prior year, and $33,000 in new
contract research organization ("CRO") payments. All other R&D costs remained
relatively flat.
Research and development expenses for the six months ended December 31, 2021,
and December 31, 2020, were $5,150,328 and $2,384,844, respectively,
representing an increase of $2,765,484 or approximately 116%. The largest
contributors to the increase in research and development expenses were the
increases in license costs related to ENOB HB-01 of $1,500,000 for achievement
of milestone, costs incurred for ENOB HV-21 of $600,000, newly incurred costs
with CDMO and CRO partners totaling $765,939, new COVID license payments of
$150,000, offset by a reduction in license costs related to ENOB-HB-01 totaling
$400,000 that were incurred in the prior period only.
The Company recorded other (expense) of $252,150 for three months ended December
31, 2021, compared to other income of $370,762 for the three months ended
December 31, 2020, representing an increase in other (expense) of $622,912 or
168%. The variance is primarily due to the change in fair value of the
contingent consideration liability expense of $660,666.
The Company recorded other (expense) of $3,159,412 for the six months ended
December 31, 2020, compared to other income of $710,155 for the six months ended
December 31, 2020, representing an increase in other (expense) of $3,869,567 or
545%. The variance is primarily due to the change in fair value of the
contingent consideration liability expense of $3,912,708.
Net Loss
Net loss for the three months ended December 31, 2021, and 2020, was $6,582,941
and $2,933,296, respectively, representing an increase in loss of $3,649,645 or
approximately 124%. The increase in net loss was primarily due to an increase in
general and administrative expenses of $2,214,913, an increase in research and
development expenses of $809,617, and the change in the change in fair value of
the contingent consideration of $660,666.
Net loss for the six months ended December 31, 2021, and 2020, was $16,994,910
and $5,329,866, respectively, representing an increase in loss of $11,665,044 or
approximately 219%. The increase in net loss was primarily due to the increase
in general and administrative expenses of $4,903,687, an increase in research
and development costs of $2,765,484, and an increase in expense related to the
change in fair value of the contingent consideration of $3,912,708.
Cash and capital resources
We have historically satisfied our capital and liquidity requirements through funding from shareholders, the sale of our Common Stock and warrants, and debt financing. We have never generated any sales revenue to support our operations and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable. At this time, we believe we have sufficient liquidity and access to committed funds to fund our operations for the next twelve months. We may need additional funds for (a) the purchase of equipment, (b) increases in personnel, and, (c) research and development, specifically to advance towards an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA for ENOB-CV-01, ENOB-HB-01, ENOB-HV-01, and ENOB-HV-21. We will also require additional funding to continue our research and development of ENOB-HV-11/12, ENOB-DC-11, ENOB-FL-01 and -11 and ENOB-CV-11, to fund the Coronavirus and Influenza Indications License Agreement in furtherance of treatment related to all coronaviruses, and for possible future strategic acquisitions of businesses, products or technologies complementary to our business. If additional funds are required, we may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations. 27
From December 31, 2021the company had $13,707,907 in cash and working capital of $8,416,386 compared to $20,664,410 in cash and working capital of
$19,013,100 from June 30, 2021a decrease of 34% and 56%, respectively.
Assets Total assets at December 31, 2021, were $183,136,138 compared to $189,605,225 as of June 30, 2021. The decrease in total assets was primarily due to the decrease in cash of $6,956,503. The change in cash is primarily attributed to $5,150,328 in research and development costs related to the HBV license agreement, costs related to ENOB-CV-01 for related CDMO and CRO costs, and ENOB-HV-21 studies along with approximately $3,710,286 in general and administrative expenses, net of non-cash items, offset by an increase in funding totaling $3,178,339 related to warrants exercised during the period and drawdowns from the LPC equity line. Liabilities Total liabilities at December 31, 2021, were $17,516,675 compared to $14,942,286 as of June 30, 2021. The increase in total liabilities was primarily related to an increase of $2,991,897 in the contingent consideration liability as a result of mark-to-market adjustment, and an increase in other current liabilities of $409,273 related to a financing arrangement for a new insurance policy, partially offset by the reduction in accrued expenses of $677,940, and the reduction of accounts payable of $153,809 due to timing.
The following is a summary of the Company’s cash flows (used by) or provided by operating, investing and financing activities:
Six Months
Ended Six Months
December 31, Ended December 31,
2021 2020
Net cash (Used in) operating activities ($9,897,151) ($5,251,828) Net cash (Used in) investing activities
(5,156 ) (10,721 ) Net Cash Provided by Financing Activities 2,950,741 (40,408 ) (Loss) Gain on Currency Translation (4,937 )
31,646
Change in cash and cash equivalents ($6,956,503) ($5,271,311)
Cash Flows Cash used in operating activities for the six months ended December 31, 2021, and 2020 was ($9,897,151) and ($5,251,828), respectively. Cash used in operating activities during the current period included $5,150,328 in research and development costs related to the HBV license agreement, costs related to ENOB-CV-01 for related CDMO and CRO costs, and ENOB-HV-21 studies along with approximately $3,710,286 in general and administrative expenses, net of non-cash items.
Cash provided by financing activities for the six months ended December 31, 2021, was $2,950,741 as compared to cash used by financing activities of $40,408 during the six months ended December 31, 2020. During the six months ended December 31, 2021, the Company received financing from the drawdown of its LPC equity line of $3,048,339 and the exercise of warrants held by shareholders
of $130,000.
Off-balance sheet arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. 28
Significant Accounting Policies and Critical Accounting Estimates
The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often due to the need to make estimates about matters that are inherently uncertain.
For a full explanation of our accounting policies, see Note 1 to the unaudited condensed consolidated financial statements.
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