ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, this
Annual Report on Form 10-K contains forward-looking statements that involve significant risks and uncertainties, which may
cause our actual results to differ materially from plans and results discussed in forward-looking statements. We encourage you
to review the risks and uncertainties, discussed in “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements,” included elsewhere in this Annual Report on Form 10-K. The risks and uncertainties can cause actual results
to differ significantly from those forecasted in forward-looking statements or implied in historical results and trends.
The following discussion of our financial
condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere
in this Annual Report on Form 10-K.
Overview
We are a clinical and preclinical stage
oncology focused RNAi nanoparticle drug development company utilizing a novel technology that achieves systemic delivery for target
specific protein inhibition for any gene product that is over-expressed in disease. Our drug delivery and antisense technology,
called DNAbilize®, is a platform that uses P-ethoxy, which is a DNA backbone modification that is intended to protect the DNA
from destruction by the body’s enzymes when circulating in vivo, incorporated inside of a lipid bilayer having neutral charge.
We believe this combination allows for high efficiency loading of antisense DNA into non-toxic, cell-membrane-like structures for
delivery of the antisense drug substance into cells. In vivo, the DNAbilize® delivered antisense drug substances are systemically
distributed throughout the body to allow for reduction or elimination of target proteins in blood diseases and solid tumors. Through
testing in numerous animal studies and treatment in over 80 patients, the Company’s DNAbilize® drug candidates have demonstrated
an excellent safety profile. DNAbilize® is a registered trademark of the Company.
Using DNAbilize® as a platform for drug
development and manufacturing, we currently have four drug candidates in development to treat at least five different cancer disease
indications. Our lead drug candidate, prexigebersen (pronounced prex” i je ber’ sen), which targets growth factor receptor-bound
protein 2 (Grb2), initially started the efficacy portion of a Phase 2 clinical trial for untreated AML patients in combination
with LDAC. The interim data released on March 6, 2019 showed that 11 (65%) of the 17 evaluable patients had a response, including
five (29%) who achieved CR, including one CRi and one morphologic leukemia free state, and six (35%) stable disease
responses, including two patients who had greater than a 50% reduction in bone marrow blasts. However, DNA hypomethylating agents
are now the most frequently used agents in the treatment of elderly AML patients in the U.S. and Europe. As a result, Stage 2 of
the Phase 2 trial in AML was amended to remove the combination treatment of prexigebersen and LDAC and replace it with the combination
treatment prexigebersen and decitabine, a DNA hypomethylating agent, for treatment of a second cohort of untreated AML patients.
Since decitabine is also used as a treatment for relapsed/refractory AML patients, a cohort of relapsed/refractory AML patients
was also added to the study.
The FDA recently granted approval of venetoclax
in combination with LDAC, decitabine or azacytidine (the latter two drugs are DNA hypomethylating agents) as frontline therapy
for newly diagnosed AML in adults who are 75 years or older, or who have comorbidities precluding intensive induction chemotherapy.
We believe this recent approval of the frontline venetoclax and decitabine combination therapy provides an opportunity for combining
prexigebersen with the combination therapy for the treatment of de novo AML patients. Preclinical efficacy studies for the
triple combination treatment of prexigebersen, decitabine and venetoclax in AML have been successfully completed. In the preclinical
efficacy studies, four AML cancer cell lines were treated with three different combinations of decitabine, venetoclax and prexigebersen.
Decrease in AML cell viability was the primary measure of efficacy. The triple combination of decitabine, venetoclax and prexigebersen
showed significant improvement in efficacy in three of the four AML cell lines. Based on these results, the Company believes that
adding prexigebersen to the treatment combination of decitabine and venetoclax could lead to improved efficacy in AML patients.
Accordingly, the Company further amended Stage 2 of this Phase 2 clinical trial to add the triple combination treatment comprised
of prexigebersen, decitabine and venetoclax, which amendment has been approved by the FDA.
Bio-Path’s approved amended Stage
2 for this Phase 2 clinical trial currently has three cohorts of patients. The first two cohorts will treat patients with the triple
combination of prexigebersen, decitabine and venetoclax. The first cohort will include untreated AML patients, and the second cohort
will include relapsed/refractory AML patients. Finally, the third cohort will treat relapsed/refractory AML patients who are venetoclax-resistant
or -intolerant with the two-drug combination of prexigebersen and decitabine. The full trial design plans have approximately 98
evaluable patients for the first cohort having untreated AML patients with a preliminary review performed after 19 evaluable patients
and a formal interim analysis after 38 evaluable patients. The full trial design plans have approximately 54 evaluable patients
for each of the second cohort, having relapsed/refractory AML patients, and the third cohort, having AML patients who are venetoclax-resistant
or -intolerant, in each case with a review performed after 19 evaluable patients. The study is anticipated to be conducted at ten
clinical sites in the U.S., and Gail J. Roboz, MD will be the national coordinating Principal Investigator for the Phase 2 trial.
Dr. Roboz is a professor of medicine and director of the Clinical and Translational Leukemia Program at the Weill Medical
College of Cornell University and the New York-Presbyterian Hospital in New York City. On August 13, 2020, we announced the
enrollment and dosing of the first patient in this approved amended Stage 2 of the Phase 2 clinical study.
Our second drug candidate, BP1002, targets
the protein Bcl-2, which is responsible for driving cell survival in up to 60% of all cancers. On November 21, 2019, we announced
that the FDA cleared an IND application for BP1002. An initial Phase 1 clinical trial will evaluate the ability of BP1002 to treat
refractory/relapsed lymphoma and chronic lymphocytic leukemia patients. The Phase 1 clinical trial is being conducted at several
leading cancer centers, including MD Anderson, the Georgia Cancer Center and the Sarah Cannon Research Institute. Ian W. Flynn,
MD will be the national coordinating Principal Investigator for the Phase 1 trial. Dr. Flynn serves as the director of lymphoma
research at the Sarah Cannon Research Institute. On November 19, 2020, we announced the enrollment and dosing of the first
patient in the Phase 1 clinical trial.
Our third drug candidate, BP1003, targets
the STAT3 protein and is currently in IND enabling studies as a potential treatment of pancreatic cancer, NSCLC and AML. Preclinical
models have shown BP1003 to inhibit cell viability and STAT3 protein expression in NSCLC and AML cell lines. Further, BP1003 successfully
penetrated pancreatic tumors and significantly enhanced the efficacy of gemcitabine, a treatment for patients with advanced pancreatic
cancer, in a pancreatic cancer patient derived tumor model. Our lead indication for BP1003 is pancreatic cancer due to the severity
of this disease and the lack of effective, life-extending treatments. For example, pancreatic adenocarcinoma is projected to be
the second most lethal cancer behind lung cancer by 2030. Typical survival for a metastatic pancreatic cancer patient is about
three to six months from diagnosis. We expect to complete several IND enabling studies of BP1003 in 2021. If those studies are
successful, our goal is to file an IND in 2021 for the first-in-humans Phase 1 study of BP1003 in patients with refractory, metastatic
solid tumors, including pancreatic cancer and NSCLC.
In addition, a modified product named prexigebersen-A,
Bio-Path’s fourth drug candidate, has shown to enhance chemotherapy efficacy in preclinical solid tumor models. Prexigebersen-A
incorporates the same drug substance as prexigebersen but has a slightly modified formulation designed to enhance nanoparticle
properties. In late 2019, we filed an IND application to initiate a Phase 1 clinical trial of prexigebersen-A in patients with
solid tumors, including ovarian, endometrial, pancreatic and breast cancer. Ovarian cancer is one of the most common type of gynecologic
malignancies, with approximately 50% of all cases occurring in women older than 63 years. This trial is expected to commence after
the IND has been cleared by the FDA, which we currently anticipate being in 2021.
Our DNAbilize® technology-based products
are available for out-licensing or partnering. We intend to apply our drug delivery technology template to new disease-causing
protein targets to develop new nanoparticle antisense RNAi drug candidates. We have a new product identification template in place
to define a process of scientific, preclinical, commercial and intellectual property evaluation of potential new drug candidates
for inclusion into our drug product development pipeline. As we expand, we will look at indications where a systemic delivery is
needed and antisense RNAi nanoparticles can be used to slow, reverse or cure a disease, either alone or in combination with another
drug. On September 25, 2019, we announced that the USPTO issued a patent for claims related to DNAbilize®, including its
use in the treatment of cancers, autoimmune diseases and infectious diseases. On October 22, 2020, we announced that the USPTO
issued a Notice of Allowance for U.S. Patent Application No. 16/333,221 entitled “Combination Therapy with Liposomal
Antisense Oligonucleotides.” In addition, on February 10, 2021, we announced that the USPTO granted U.S. Patent No. 10,898,506
titled, “P-ethoxy nucleic acids for liposomal formulation.” The new patent builds on earlier patents granted that protect
the platform technology for DNAbilize®, the Company’s novel RNAi nanoparticle drugs. The new patent is the
third patent in our family of platform intellectual property and offers expanded defense of our DNAbilize® platform
technology..
We have certain intellectual property as
the basis for our current drug products in clinical development, prexigebersen, prexigebersen-A, BP1002 and BP1003. We are developing
RNAi antisense nanoparticle drug candidates based on our own patented technology to treat cancer and autoimmune disorders where
targeting a single protein may be advantageous and result in reduced patient adverse effects as compared to small molecule inhibitors
with off-target and non-specific effects. We have composition of matter and method of use intellectual property for the design
and manufacture of antisense RNAi nanoparticle drug products.
As of December 31, 2020, we had an
accumulated deficit of $67.2 million. Our net loss was $10.9 million and $8.6 million for the years ended December 31, 2020
and 2019, respectively. We expect to continue to incur significant operating losses, and we anticipate that our losses may increase
substantially as we expand our drug development programs and commercialization efforts. To achieve profitability, we must enter
into license or development agreements with third parties, or successfully develop and obtain regulatory approval for one or more
of our drug candidates and effectively commercialize any drug candidates we develop. In addition, if we obtain regulatory approval
of one or more of our drug candidates, we expect to incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution. Even if we succeed in developing and commercializing one or more of our drug candidates, we may
not be able to generate sufficient revenue and we may never be able to achieve or sustain profitability. We expect to finance our
foreseeable cash requirements through cash on hand, cash from operations, debt financings and public or private equity offerings.
We may seek to access the public or private equity markets whenever conditions are favorable; however, there can be no assurance
that we will be able to raise additional capital when needed or on terms that are favorable to us, if at all. Additionally, we
may seek collaborations and license arrangements for our drug candidates. We currently have no lines of credit or other arranged
access to debt financing.
Financial Operations Overview
Revenue
We have not generated significant revenues
to date. Our ability to generate revenues from our drug candidates, which we do not expect will occur for many years, if ever,
will depend heavily on the successful development and eventual commercialization of our drug candidates.
In the future, we may generate revenue from
a combination of product sales, third-party grants, service agreements, strategic alliances and licensing arrangements. We expect
that any revenue we generate will fluctuate due to the timing and amount of services performed, milestones achieved, license fees
earned and payments received upon the eventual sales of our drug candidates, in the event any are successfully commercialized.
If we fail to complete the development of any of our drug candidates or obtain regulatory approval for them, our ability to generate
future revenue will be adversely affected.
Research and development expenses
Research and development expenses consist
of costs associated with our research activities, including the development of our drug candidates. Our research and development
expenses consist of:
• costs of materials used during research and development activities.
Costs and expenses that can be clearly identified
as research and development are charged to expense as incurred. Advance payments, including nonrefundable amounts, for goods or
services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts
will be recognized as an expense as the related goods are delivered or the related services are performed. If the goods will not
be delivered, or services will not be rendered, then the capitalized advance payment is charged to expense.
We expect research and development expenses
associated with the completion of the associated clinical trials to be substantial and to increase over time. The successful development
of our drug candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated
costs of the efforts that will be necessary to complete development of our drug candidates or the period, if any, in which material
net cash inflows from our drug candidates may commence. This is due to the numerous risks and uncertainties associated with developing
drugs, including the uncertainty of:
• competing technological and market developments;
• the performance of third-party manufacturers and suppliers;
A change in the outcome of any of these
variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated
with the development of that drug candidate. For example, if the FDA or other regulatory authority were to require us to conduct
clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a drug
candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant
additional financial resources and time on the completion of clinical development.
General and administrative expenses
Our general and administrative expenses
consist primarily of salaries and benefits for management and administrative personnel, professional fees for legal, accounting
and other services, travel costs and facility-related costs such as rent, utilities and other general office expenses.
Results of Operations
Comparisons of the Year Ended December 31,
2020 to the Year Ended December 31, 2019
Revenue. We had no revenue for each
of the years ended December 31, 2020 and 2019.
Research and Development Expenses.
Our research and development expense was $6.6 million for the year ended December 31, 2020, an increase of $2.0 million compared
to the year ended December 31, 2019. The increase in research and development expense was primarily due to increased enrollment
for our Phase 2 clinical trial of prexigebersen in AML, startup costs related to our Phase 1 clinical trials for BP1002 in lymphoma
and prexigebersen-A in solid tumors, increased preclinical expenses for BP1003 and increased drug material manufacturing activities.
The following table sets forth our research and development expenses (in thousands):
Year ended
December 31,
Research and development expense $ 6,477 $ 4,488
Non-cash stock-based compensation expense 101 97
Total research and development expense $ 6,578 $ 4,585
General and Administrative Expenses.
Our general and administrative expense was $4.3 million for the year ended December 31, 2020, an increase of $0.2 million
compared to the year ended December 31, 2019. The increase in general and administrative expense was primarily due to increased
franchise tax expense, which was partially offset by a decrease in stock-based compensation expense. The following table sets forth
our general and administrative expenses (in thousands):
Year ended
December 31,
General and administrative expense $ 3,854 $ 3,521
Non-cash stock-based compensation expense 476 587
Total general and administrative expense $ 4,330 $ 4,108
Net Operating Loss. Our net loss
from operations was $10.9 million for the year ended December 31, 2020, an increase of $2.2 million compared to the year ended
December 31, 2019.
Net Loss. Our net loss was $10.9
million for the year ended December 31, 2020, an increase of $2.3 million compared to the year ended December 31, 2019.
Net Loss per Share. Net loss per
share, both basic and diluted, was $2.83 per share for the year ended December 31, 2020, compared to $3.24 per share for the
year ended December 31, 2019. Net loss per share is calculated using the weighted average number of shares of common stock
outstanding during the applicable periods and excludes stock options and warrants because they are antidilutive.
Liquidity and Capital Resources
Overview
We have not generated significant revenues
to date. Since our inception, we have funded our operations primarily through public and private offerings of our capital stock
and other securities. We expect to finance our foreseeable cash requirements through cash on hand, cash from operations, debt financings
and public or private equity offerings. We may seek to access the public or private equity markets whenever conditions are favorable;
however, there can be no assurance that we will be able to raise additional capital when needed or on terms that are favorable
to us, if at all. Additionally, we may seek collaborations and license arrangements for our drug candidates. We currently have
no lines of credit or other arranged access to debt financing.
We had a cash balance of $13.8 million at
December 31, 2020, a decrease of $6.7 million compared to December 31, 2019. We believe that our available cash at December 31,
2020, together with the net proceeds received from the 2021 Registered Direct Offering and sales of our common stock under the
Offering Agreement, each as described below, in addition to net proceeds received from warrant exercises subsequent to December 31,
2020, will be sufficient to meet obligations and fund our liquidity and capital expenditure requirements for at least the next
12 months from the date of this Annual Report on Form 10-K.
Cash Flows
For the Year Ended December 31,
2020
Operating Activities. Net cash used
in operating activities for the year ended December 31, 2020 was $11.0 million. Excluding non-cash stock-based compensation
expense of $0.6 million and depreciation and amortization expenses of $0.2 million, net cash used in operating activities consisted
primarily of the net loss for the period of $10.9 million, an increase in current assets of $0.6 million and a decrease in operating
liabilities of $0.2 million.
Financing Activities. Net cash provided
by financing activities for the year ended December 31, 2020 consisted primarily of net proceeds of $4.3 million from the
offer and sale of shares of our common stock under the Offering Agreement, as described below.
For the Year Ended December 31, 2019
Operating Activities. Net cash used
in operating activities for the year ended December 31, 2019 was $8.4 million. Excluding non-cash stock-based compensation
expense of $0.7 million and amortization and depreciation expenses of $0.2 million, net cash used in operating activities consisted
primarily of the net loss for the period of $8.6 million, an increase in current assets of $0.4 million and a decrease in current
liabilities of $0.2 million.
Financing Activities. Net cash provided
by financing activities for the year ended December 31, 2019 consisted primarily of net proceeds of $26.7 million from the
2019 Underwritten Offering, the January 2019 Registered Direct Offering and January 2019 Private Placement, the March 2019
Registered Direct Offering and the November 2019 Registered Direct Offering, each as described below, as well as net proceeds
of $1.1 million from the exercise of warrants to purchase shares of our common stock.
2019 Shelf Registration Statement
On May 16, 2019, we filed a shelf registration
statement on Form S-3 with the SEC, which was declared effective by the SEC on June 5, 2019 (File No. 333-231537)
(the “2019 Shelf Registration Statement”), at which time the offering of unsold securities under a previous shelf registration
statement on Form S-3 filed with the SEC, which was declared effective by the SEC on January 9, 2017 (File No. 333-215205)
(the “2017 Shelf Registration Statement”), was deemed terminated pursuant to Rule 415(a)(6) under the Securities
Act. The 2019 Shelf Registration Statement was filed to register the offering, issuance and sale of (i) up to $125.0 million
of our common stock, preferred stock, warrants to purchase common stock or preferred stock or any combination thereof, either individually
or in units, and (ii) up to 5,149 shares of our common stock pursuant to the exercise of warrants that were issued in connection
with a registered direct offering in 2016. Because our public float is less than $75 million, our ability to offer and sell any
securities under the 2019 Shelf Registration Statement is currently limited pursuant to Instruction I.B.6 to Form S-3. For
so long as the Company's public float is less than $75 million, the aggregate market value of securities sold by the Company under
the 2019 Shelf Registration Statement pursuant to Instruction I.B.6 to Form S-3 during any 12 consecutive months may not exceed
one-third of the Company’s public float. The foregoing does not constitute an offer to sell or the solicitation of an offer
to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.
2019 Underwritten Offering
On January 14, 2019, we entered into
an underwriting agreement with H. C. Wainwright & Co., LLC (“Wainwright”) relating to an underwritten public
offering of 429,616 shares of our common stock for gross proceeds of approximately $1.1 million under the 2017 Shelf Registration
Statement (the “2019 Underwritten Offering”). The offering price to the public in the 2019 Underwritten Offering was
$2.60 per share, and Wainwright agreed to purchase the shares in the 2019 Underwritten Offering from the Company pursuant to the
underwriting agreement at a price of $2.418 per share. Additionally, we issued warrants to purchase up to 25,777 shares of our
common stock in a private placement to Wainwright as compensation for its services as underwriter in connection with the 2019 Underwritten
Offering. The 2019 Underwritten Offering closed on January 17, 2019. The net proceeds to the Company from the 2019 Underwritten
Offering, after deducting the underwriting discounts and commissions and expenses and the Company’s offering expenses, and
excluding the proceeds, if any, from the exercise of the underwriter warrants, were approximately $0.9 million.
January 2019 Registered Direct
Offering and January 2019 Private Placement
On January 18, 2019, we entered into
a securities purchase agreement with certain investors pursuant to which we agreed to sell, in a registered direct offering, an
aggregate of 648,233 shares of our common stock for gross proceeds of approximately $1.7 million under the 2017 Shelf Registration
Statement (the “January 2019 Registered Direct Offering”). In a concurrent private placement, we also agreed
pursuant to the securities purchase agreement to issue to such investors Series A warrants to purchase up to 324,117 shares
of our common stock (the “January 2019 Private Placement”). Additionally, we issued warrants to purchase up to
38,894 shares of our common stock in a private placement to Wainwright as compensation for its services as a placement agent in
connection with the January 2019 Registered Direct Offering and the January 2019 Private Placement. The January 2019
Registered Direct Offering and the January 2019 Private Placement closed on January 23, 2019. The net proceeds to the
Company from the offerings, after deducting the placement agent’s fees and expenses and the Company’s offering expenses,
and excluding the proceeds, if any, from the exercise of the warrants issued in the offerings, were approximately $1.5 million.
March 2019 Registered Direct
Offering
On March 12, 2019, we entered into
a securities purchase agreement with certain investors pursuant to which we agreed to sell, in a registered direct offering, an
aggregate of 712,910 shares of our common stock for gross proceeds of approximately $18.5 million under the 2017 Shelf Registration
Statement (the “March 2019 Registered Direct Offering”). Additionally, we issued warrants to purchase up to 42,775
shares of our common stock in a private placement to Wainwright as compensation for its services as a placement agent in connection
with the March 2019 Registered Direct Offering. The March 2019 Registered Direct Offering closed on March 14, 2019.
The net proceeds to the Company from the offerings, after deducting the placement agent’s fees and expenses and the Company’s
offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offerings, were approximately
$17.0 million.
November 2019 Registered Direct
Offering
On November 21, 2019, we entered into
a securities purchase agreement with certain investors pursuant to which we agreed to sell, in a registered direct offering, an
aggregate of 808,080 shares of our common stock and warrants to purchase up to 606,060 shares of our common stock for gross proceeds
of approximately $8.0 million under the 2019 Shelf Registration Statement (the “November 2019 Registered Direct Offering”).
Additionally, we issued warrants to purchase up to 48,485 shares of our common stock to Wainwright as compensation for its services
as a placement agent in connection with the November 2019 Registered Direct Offering, which warrants and the common stock
issuable upon exercise of such warrants were registered under the 2019 Shelf Registration Statement. The November 2019 Registered
Direct Offering closed on November 25, 2019. The net proceeds to the Company from the offerings, after deducting the placement
agent’s fees and expenses, and the Company’s offering expenses, and excluding the proceeds, if any, from the exercise
of the warrants issued in the offerings, were approximately $7.3 million.
At-The-Market Offering Agreement
On July 13, 2020, we entered into an
At-The-Market Offering Agreement (the “Offering Agreement”) with Wainwright, as sales agent and/or principal, pursuant
to which we may offer and sell, from time to time, through or to Wainwright, shares of our common stock. Sales of shares of common
stock under the Offering Agreement will be made pursuant to the 2019 Shelf Registration Statement and a related prospectus supplement
filed with the SEC on July 14, 2020, for an aggregate offering price of up to $7.0 million, provided that we may be limited
in the amount of securities that we can sell under the Offering Agreement pursuant to Instruction I.B.6 to Form S-3 for so
long as our public float remains less than $75.0 million. Under the Offering Agreement, Wainwright may sell shares by any method
deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act. We will pay Wainwright
a commission of 3% of the aggregate gross proceeds from each sale of shares under the Offering Agreement and have agreed to provide
Wainwright with customary indemnification and contribution rights. We have also agreed to reimburse Wainwright for certain specified
expenses. As of December 31, 2020, we had offered and sold 850,000 shares of our common stock under the Offering Agreement
for gross proceeds of approximately $4.6 million. The net proceeds to the Company from the offering, after deducting commissions
and the Company’s offering expenses, were approximately $4.3 million. Subsequent to December 31, 2020, we offered and
sold 278,800 shares of our common stock under the Offering Agreement for gross proceeds of approximately $2.3 million. The net
proceeds to the Company from the offering, after deducting commissions and the Company’s offering expenses, were approximately
$2.2 million.
2021 Registered Direct Offering
On February 16, 2021, we entered into
a placement agency agreement with Roth Capital Partners, LLC relating to a public offering of 1,710,600 shares of our common stock
for gross proceeds of approximately $13.0 million under the 2019 Shelf Registration Statement (the “2021 Registered Direct
Offering”). In addition, on February 16, 2021, we entered into a securities purchase agreement with certain institutional
investors pursuant to which we agreed to sell an aggregate of 1,650,000 shares of our common stock in the 2021 Registered Direct
Offering to such investors. The 2021 Registered Direct Offering closed on February 18, 2021. The net proceeds to the Company
from the offerings, after deducting the placement agent’s fees and expenses and the Company’s offering expenses, were
approximately $12.2 million.
Future Capital Requirements
We expect to continue to incur significant
operating expenses in connection with our ongoing activities, including conducting clinical trials, manufacturing and seeking regulatory
approval of our drug candidates, prexigebersen, prexigebersen-A, BP1002 and BP1003. Accordingly, we will continue to require substantial
additional capital to fund our projected operating requirements. Such additional capital may not be available when needed or on
terms favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations,
even if we believe we have sufficient funds for our current and future operating plan. There can be no assurance that we will be
able to continue to raise additional capital through the sale of our securities in the future. Our future capital requirements
may change and will depend on numerous factors, which are discussed in detail in “Item 1A. Risk Factors” of this Annual
Report on Form 10-K.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not
have any material off-balance sheet arrangements.
Critical Accounting Policies
Our management’s discussion and analysis
of our financial condition and results of operations are based on our financial statements, which have been prepared in conformity
with GAAP in the U.S. The preparation of such financial statements has required our management to make assumptions, estimates and
judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of
commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant
judgments and estimates in the preparation of financial statements, including the following:
Research and Development Costs - Costs
and expenses that can be clearly identified as research and development are charged to expense as incurred. Advance payments, including
nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are deferred
and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed.
If the goods will not be delivered, or services will not be rendered, then the capitalized advance payment is charged to expense.
The Company estimates its clinical trial
expense accrual each period based on a cost per patient calculation which is derived from estimated start-up costs, clinical trial
costs based on the number of patients and length of treatment and clinical study report costs. These services are performed by
the Company’s third-party clinical research organizations, laboratories and clinical investigative sites. The expense accrual
is recorded in research and development expense each period. Amounts that have been prepaid in advance of work performed are recorded
in other current assets.
For the year ended December 31, 2020
and 2019, we had $6.6 million and $4.6 million, respectively, of costs classified as research and development expense.
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, together
with the report of our independent registered public accounting firm, are set forth beginning on page F-1 of this Annual Report
on Form 10-K.
ITEM 9. CHANGES AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS
AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
It is management’s responsibility
to establish and maintain adequate disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act. Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure
that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including
the company’s principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required
disclosure.
Our management, including our Chief Executive
Officer (who is also our Chief Financial Officer), has reviewed and evaluated the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered
by this Annual Report on Form 10-K. Following this review and evaluation, our management determined that as of the end of
the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management,
including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Management’s Report on Internal
Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Rule 13a-15(f) under
the Exchange Act, is a process designed by, or under the supervision of, our principal executive officer and our principal financial
officer, and effected by our Board, management, and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those
policies and procedures that:
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. The scope of management’s assessment of the effectiveness of internal control over financial
reporting includes our consolidated subsidiary.
Management’s assessment of the effectiveness
of our internal controls is based principally on our financial reporting as of December 31, 2020. In making our assessment
of internal control over financial reporting, management used the criteria set forth in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management, with the participation
of our Chief Executive Officer (who is also our Chief Financial Officer), has evaluated the effectiveness of our internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as of December 31,
2020. Based on this evaluation, management believes that, as of December 31, 2020, our internal control over financial reporting
was effective.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting that occurred during the fourth fiscal quarter of 2020 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identification of Directors and Executive
Officers
Our current directors and officers are set
forth below:
Name Age Position - Committee
Our current directors will serve until the
next annual meeting of stockholders or until their successors are elected or appointed and qualified.
Background Information
Peter H. Nielsen. Mr. Nielsen
co-founded Bio-Path and has served as Bio-Path’s President, Chief Executive Officer, Chief Financial Officer/Treasurer and
Chairman of the Board since 2008. At the time of Bio-Path’s establishment in 2007, Mr. Nielsen licensed technology and
targets from The University of Texas, MD Anderson Cancer Center and coordinated preclinical development, optimization and manufacturing
of Bio-Path’s lead drug candidate, prexigebersen. Since that time, Mr. Nielsen has led the clinical advancement of prexigebersen
into Phase 2 studies, the introduction of additional pipeline candidates and the Company’s public market debut. Prior to
co-founding Bio-Path, Mr. Nielsen worked with several other companies, leading turnarounds and developing and executing on
strategies for growth. Mr. Nielsen previously served as a director of Synthecon, Inc., a company developing 3D cell culture
technology. Before entering the biotechnology sector, Mr. Nielsen was a lieutenant in the U.S. Naval Nuclear Power program
where he was director of the physics department and was employed at Ford Motor Company in product development. Mr. Nielsen
has a broad background in senior management and has significant negotiating experience. He holds engineering, mathematics and M.B.A.
finance degrees from the University of California at Berkeley.
Heath W. Cleaver, CPA. Mr. Cleaver
has served as a director of Bio-Path since 2014. Since February 2020, Mr. Cleaver has served as the President and Chief
Financial Officer of Compressor Engineering Corporation (“CECO”), a privately-held independent manufacturer of engine
and compressor replacement parts. Prior to his current roles, Mr. Cleaver served as Chief Financial Officer of CECO from July 2017
to February 2020. Mr. Cleaver was previously a consultant providing turn-around management and capital raising services
to companies in the oil and gas service sector from 2016 to 2017. From 2015 to 2016, Mr. Cleaver served as the Chief Financial
Officer of Global Fabrication Services, Inc. In 2014, Mr. Cleaver served as Chief Financial Officer at Tarka Resources, Inc.
From 2011 until 2014, Mr. Cleaver served as Chief Financial Officer of Porto Energy Corp. From 2010 until 2011, Mr. Cleaver
served as Chief Accounting Officer of Porto Energy Corp. Mr. Cleaver served as Corporate Controller and then as Vice President
and Chief Accounting Officer for BPZ Energy from 2006 to 2010. Beginning in 1997 through 2004, Mr. Cleaver served in various
accounting roles, including Financial Controller, at Horizon Offshore Contractors, Inc. Mr. Cleaver is a Certified Public
Accountant in the state of Texas and holds a Bachelor’s Degree in Business Administration - Accounting from Texas A&M
University.
Paul D. Aubert. Mr. Aubert
was appointed to the Board on February 1, 2018. Mr. Aubert is currently Senior Vice President & General Counsel
of Anthem Holdings Company and its subsidiaries, positions he has held since March 2018. From June 2014 to March 2018,
he practiced law in a solo law practice and also served as part-time General Counsel to his current employers. From February 2012
through May 2014, Mr. Aubert served as General Counsel of Pernix Therapeutics Holdings, Inc., a Nasdaq-listed specialty
pharmaceutical company. Before that, he was a Shareholder in the Corporate and Securities practice group at Winstead PC, a national
law firm headquartered in Dallas, Texas, from 2007 to 2012. Mr. Aubert also served as an attorney in the Corporate and Securities
practice groups of several national and international law firms prior to joining Winstead in 2004, including at Andrews Kurth LLP
from 1999 to 2004, Weil, Gotshal & Manges LLP from 1998 to 1999 and Jones Walker LLP from 1996 to 1998. Mr. Aubert
holds a Juris Doctor and an M.B.A. from Tulane University in New Orleans, Louisiana and a B.A. in History from Louisiana State
University - Baton Rouge.
Martina Molsbergen. Ms. Molsbergen
was appointed to the Board on October 11, 2019. Ms. Molsbergen has more than 25 years of business development and marketing
experience, including more than 15 years of business development expertise in cutting edge technology tools and products for biotherapeutics,
immunotherapies and regenerative medicine. Since October 2009, Ms. Molsbergen has served as the Chief Executive Officer
of C14 Consulting Group, LLC, a private consulting company focused on providing business development support for the biotech, VC
and pharmaceutical communities. From 2007 to October 2009, Ms. Molsbergen served as Vice President of Business Development
of Crucell Holland BV, a biotechnology company specializing in vaccines and biopharmaceutical technologies. From 2004 to 2007,
Ms. Molsbergen served as Vice President of Business Development of Biowa, Inc. Ms. Molsbergen served as Vice President
of Business Development of Zetiq Technologies Ltd. from 2002 to 2003 and as Vice President of Pharmaceutical Development Services &
Business Development of Patheon Inc. from 1997 to 2001. Ms. Molsbergen holds a B.S. in Chemical Engineering from Drexel University.
Douglas P. Morris. Mr. Morris
is a co-founder of Bio-Path and has served as a director of Bio-Path since 2007 and served as an officer from 2007 to June 2014.
Mr. Morris also currently serves as the Director of Investor Relations and the Secretary of Bio-Path. Mr. Morris previously
served as a co-founder, Managing Member, and Secretary of nCAP Holdings, LLC (nCAP), a privately held technology based company
from September 2013 to January 2016. Between 1993 and 2010, Mr. Morris was an officer and director of Celtic Investment, Inc.,
a financial services company. Mr. Morris owned and operated Hyacinth Resources, LLC (“Hyacinth”), a business-consulting
firm, from 1990 until September 2018, and is also a Managing Member of Sycamore Ventures, LLC, a privately held consulting
firm. Mr. Morris has a B.A. from Brigham Young University, and attended the University of Southern California Master’s
program in public administration.
Board of Directors
Our operations are managed under the broad
supervision of the Board, which has ultimate responsibility for the establishment and implementation of our general operating philosophy,
objectives, goals and policies. Our Board is currently comprised of three independent directors and two non-independent directors.
The Board has determined that current directors Heath W. Cleaver, Paul D. Aubert and Martina Molsbergen are “independent”
as independence is defined under the listing standards for The Nasdaq Stock Market. The Board based these determinations primarily
on a review of the responses our directors provided to questions regarding employment and compensation history, affiliations and
family and other relationships.
Codes of Ethics
We have adopted the Employee Code of Business
Conduct and Ethics, which applies to all of our employees, including our executive officers, and the Code of Business Conduct
and Ethics for Members of the Board, which applies to members of the Board.
Board Committees
The Board has a standing audit committee
(the “Audit Committee”), compensation committee (the “Compensation Committee”) and nominating/corporate
governance committee (the “Nominating/Corporate Governance Committee”), each of which is governed by a charter. The
Board may also establish other committees from time to time as necessary to facilitate the management of the business and affairs
of the Company. The Board recently formed a business development committee (the “Business Development Committee”) that
assists the Board by advising management on its plans for business development, licensing opportunities and business partnership
opportunities. In addition to these committees, we also have a Scientific Advisory Board that serves an advisory role to management
and the Board. The information below summarizes the functions of each of the committees and the Scientific Advisory Board.
Audit Committee
The Audit Committee has been structured
to comply with the requirements of Section 3(a)(58)(A) of the Exchange Act. The Board has determined that the Audit Committee
members have the appropriate level of financial understanding and industry specific knowledge to be able to perform the duties
of the position and are financially literate and have the requisite financial sophistication as required by the applicable listing
standards of The Nasdaq Stock Market.
The Audit Committee, as permitted by, and
in accordance with, its charter, is responsible to periodically assess the adequacy of procedures for the public disclosure of
financial information and review on behalf of the Board, and report to the Board, the results of its review and its recommendation
regarding all material matters of a financial reporting and audit nature, including, but not limited to, the following main subject
areas:
· financial statement, including management’s discussion and analysis thereof;
· internal controls;
· audits and reviews our financial statements; and
The Audit Committee appoints and sets the
compensation for the independent registered public accounting firm annually and reviews and evaluates such external auditor. This
external auditor reports directly to the Audit Committee. The Audit Committee establishes our hiring policies regarding current
and former partners and employees of the external auditor. In addition, the Audit Committee pre-approves all audit and non-audit
services undertaken by the external auditor.
The Audit Committee has direct responsibility
for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor’s report or performing
other audit, review or attest services, including the resolution of disagreements between the external auditor and management.
The Audit Committee is comprised of Messrs. Cleaver
and Aubert and Ms. Molsbergen. Mr. Cleaver currently serves as the chair of the Audit Committee. The Board has determined
that Mr. Cleaver qualifies as an “audit committee financial expert” under the Exchange Act and that each member
of the Audit Committee is an independent director. The Audit Committee meets at least once per fiscal quarter to fulfill its responsibilities
under its charter and in connection with the review of the Company’s quarterly and annual financial statements.
Compensation Committee
The Compensation Committee’s role
is to assist the Board in fulfilling its responsibilities relating to all forms of compensation of the Company's executive officers,
administering the Company's incentive compensation plan and other benefits plans, including a deferred compensation plan, if applicable,
and producing any required report on executive compensation for use in the Company's proxy statement or other public disclosure.
The Compensation Committee operates under a written charter adopted by the Board. The Compensation Committee periodically assesses
compensation of our executive officers in relation to companies of comparable size, industry and complexity, taking the performance
of the Company and such other companies into consideration. All decisions with respect to the compensation of our Chief Executive
Officer are determined and approved either solely by the Compensation Committee or together with other independent directors, as
directed by the Board. All decisions with respect to non-CEO executive compensation, and incentive-compensation and equity-based
plans are first approved by the Compensation Committee and then submitted, together with the Compensation Committee’s recommendation,
to the members of the Board for final approval. In addition, the Compensation Committee will, as appropriate, review and approve
public or regulatory disclosure respecting compensation, including required disclosures regarding executive compensation under
Item 402 of Regulation S-K, and the basis on which performance is measured. The Compensation Committee has the authority to retain
and compensate any outside adviser as it determines necessary to permit it to carry out its duties. The Compensation Committee
has not to date engaged the services of any executive compensation consultant. The Compensation Committee may not form or delegate
authority to subcommittees without the prior approval of the Board.
The Compensation Committee is comprised
of Messrs. Aubert and Cleaver and Ms. Molsbergen, each of whom are independent under the rules of The Nasdaq Stock
Market. The Compensation Committee meets as necessary. Mr. Aubert is the chair of the Compensation Committee.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee’s
charter provides that the responsibilities of such committee include:
· evaluating, identifying and recommending nominees to the Board;
· recommending directors to serve as committee members and chairs;
The Nominating/Corporate Governance Committee
is responsible for, among other things, identifying and recommending potential candidates for nomination to the Board. The Nominating/Corporate
Governance Committee receives advice from the Board and will consider written recommendations from the stockholders of the Company
respecting individuals best suited to serve as directors, and, when necessary, develops its own list of appropriate candidates
for directorships. For a description of the procedures to be followed by stockholders of the Company in submitting recommendations
to be considered by the Nominating/Corporate Governance Committee, see the discussion set forth below under the heading titled,
“Stockholder Nominations for Directors.”
The Nominating/Corporate Governance Committee
is comprised of Messrs. Cleaver and Aubert and Ms. Molsbergen, each of whom are independent under the rules of The
Nasdaq Stock Market. The Nominating/Corporate Governance Committee meets at least annually, and otherwise as necessary. Mr. Cleaver
is the chair of the Nominating/Corporate Governance Committee.
Business Development Committee
The Business Development Committee assists
the Board by advising management on its plans for business development, licensing opportunities and business partnership opportunities.
The Business Development Committee also performs other duties as directed by the Board from time to time and operates under a written
charter adopted by the Board. The Business Development Committee is currently comprised of Ms. Molsbergen and Messrs. Nielsen
and Morris. Ms. Molsbergen currently serves as the chair of the Business Development Committee.
Scientific Advisory Board
The Scientific Advisory Board assists management
and the Board on an advisory basis with respect to the research, development, clinical, regulatory and commercial plans and activities
relating to research, manufacture, use and/or sale of our drug candidates and products. The Scientific Advisory Board meets on
an ad hoc basis and may attend meetings of the Board at the Board’s request. The current members of the Scientific
Advisory Board are Jorge Cortes, M.D, who serves as chairman, D. Craig Hooper, Ph.D., and Jason Fleming, M.D.
Availability of Committee Charters and
Other Information
The charters for our Audit Committee, Compensation
Committee, and Nominating/Corporate Governance Committee, as well as our Corporate Governance Guidelines, Employee Code of Business
Conduct and Ethics and Code of Business Conduct and Ethics for Members of the Board, are available under the section titled “Corporate
Governance” on the Investors page of the Company’s website, www.biopathholdings.com. We intend to disclose
any changes to or waivers from the Employee Code of Business Conduct and Ethics that would otherwise be required to be disclosed
under Item 5.05 of Form 8-K on our website. The information on our website is not, and shall not be deemed to be, a part of
this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
We also make available on our website, free
of charge, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to those reports, as well as other documents that we file with or furnish to the SEC pursuant to Sections 13(a) or
15(d) of the Exchange Act, as soon as reasonably practicable after such documents are filed with, or furnished to, the SEC.
Nomination Process
It is our Board’s responsibility to
nominate members for election to the Board and to fill vacancies on the Board that may occur between annual meetings of stockholders.
The Nominating/Corporate Governance Committee assists the Board by identifying and reviewing potential candidates for Board membership
consistent with criteria approved by the Board. The Nominating/Corporate Governance Committee also annually recommends qualified
candidates (which may include existing directors) for approval by the Board of a slate of nominees to be proposed for election
to the Board at the annual meeting of stockholders.
In the event of a vacancy on the Board between
annual meetings of our stockholders, the Board may request that the Nominating/Corporate Governance Committee identify, review
and recommend qualified candidates for Board membership for Board consideration to fill such vacancies, if the Board determines
that such vacancies will be filled. Our First Amended and Restated Bylaws (the “Bylaws”) allow for up to fifteen directors.