MBRX US Equity☆

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2022

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

For the transition period from to

Commission File Number: 001-37758

Moleculin Biotech, Inc.

(Exact name of registrant as specified in its charter)

(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer

5300 Memorial Drive, Suite 950

Houston, Texas77007

(713) 300-5160

(Address of Principal Executive Offices, Zip Code and Registrant's Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol (s) Name of Each exchange on which registered

Common Stock, par value $0.001 per share MBRX Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Accelerated filer ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the registrant’s voting equity held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter, was $40 million. In determining the market value of the voting equity held by non-affiliates, securities of the registrant beneficially owned by directors, officers and 10% or greater shareholders of the registrant have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of shares of the registrant’s common stock outstanding as of March 14, 2023 was 28,627,827.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of this registrant’s definitive proxy statement for its 2023 Annual Meeting of Stockholders to be filed with the SEC no later than 120 days after the end of the registrant’s fiscal year are incorporated herein by reference in Part III of this Annual Report on Form 10-K.

Table of Contents

Moleculin Biotech, Inc.

Table of Contents

PART I

Item 1. Business 2

Item 1A. Risk Factors 23

Item 1B. Unresolved Staff Comments 42

Item 2. Properties 42

Item 3. Legal Proceedings 42

Item 4. Mine Safety Disclosure 42

PART II

Item 6. [Reserved] 43

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49

Item 8. Financial Statements and Supplementary Data 49

Item 9A. Controls and Procedures 49

Item 9B. Other Information 49

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 49

PART III

Item 10. Directors, Executive Officers and Corporate Governance 50

Item 11. Executive Compensation 50

Item 14. Principal Accountant Fees and Services 50

PART IV

Item 15. Exhibits and Financial Statement Schedules 50

Signatures 54

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Moleculin Biotech, Inc.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Securities and Exchange Commission, referred to herein as the SEC, encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Certain statements that we may make from time to time, including, without limitation, statements contained in this report constitute “forward- looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

We make forward-looking statements under the “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this report. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “should,” “would,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under “Risk Factors.”

While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this report describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very highly regulated, competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations, and we do not intend to do so.

Forward-looking statements include, but are not limited to, statements about:

• Our ability to source our drug products at reasonable prices;

• Potential efficacy of our drug candidates;

• Our ability to commercialize our drug candidates;

• Market acceptance of our drug candidates;

• Competition from existing therapies or new therapies that may emerge;

• Potential product liability claims;

• Our ability to adequately support future growth; and

We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-K in the case of forward-looking statements contained in this Form 10-K.

PART I

References in this Annual Report on Form 10-K to “MBI”, "Moleculin" or “the Company”, “we”, “our” and “us” are used herein to refer to Moleculin Biotech, Inc.

ITEM 1. BUSINESS

Our Business

We are a clinical stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial1, based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas. Three of our six drug candidates have shown human activity in clinical trials and are currently in Phase 1b/2 or Phase 2 clinical trials. Since our inception, our drugs have been in, are currently in, or have received approval to proceed in eleven clinical trials.

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Our Core Technologies

Our core technologies consist of the following:

a) Annamycin or L-Annamycin is a “next generation” anthracycline designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms. Annamycin was designed to avoid multidrug resistance and has shown no cardiotoxicity2 in subjects treated in clinical trials to date. Furthermore, we have demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity;

b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs); and

c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, and WP1097) designed to exploit the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to cut off the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells, as well as viruses that depend upon glycolysis and glycosylation to infect and replicate.

Our Focus

We are focused on internally funded (“internally” and “externally” funded trials are defined in the Funding Strategy section below) development of:

1) Annamycin for the treatment of Soft Tissue Sarcoma metastasized to the lungs (STS lung metastases or STS lung mets)

2) Annamycin in combination with Cytarabine (also known as Ara-C, the combination with Annamycin of which is referred to as AnnAraC) for the treatment of Relapsed or Refractory Acute Myeloid Leukemia (R/R AML or AML).

3) Developing a better delivery mechanism for WP1066 to further support current and possibly future externally funded oncology clinical trials.

We have also recently established a Recommended Phase 2 Dose (RP2D) for WP1122 to potentially enable future externally funded oncology and virology trials. Beyond this, we support development of our core technologies through several externally funded clinical trials with the potential for others in the near-term.

Our Clinical Trials

In the US and Europe, we or external investigators have approved, are currently conducting or have completed eleven internally or externally funded clinical trials for four of our drug candidates – Annamycin, WP1066, WP1220, and WP1122 since inception. All clinical trials are or were in the Phase 1 or 2 stage. During 2021, we had four active clinical trials evaluating either Annamycin or WP1066 in the US and Europe. This increased to six active or just completed trials in 2022 involving Annamycin, WP1066, and WP1122. In 2021 and 2022, there were five “right-to-try” (or their foreign equivalent) uses of Annamycin and WP1066. Three of the six clinical trials active in 2022 are internally funded trials of Annamycin and one is an internally funded Phase 1 clinical trial for WP1122 setting a RP2D.

Moving into 2023, we are actively recruiting in three clinical trials in a Phase 1b/2 or Phase 2 stage and have recently concluded one trial. These three currently active clinical trials are open label so we expect to be able to announce any human activity that is being demonstrated in these trials during 2023. In February 2023, the externally funded Phase 1 clinical trial with WP1066 for the treatment of pediatric brain tumors concluded. We expect up to three externally funded Phase 1b/2 clinical trials for WP1066 in the treatment of GBM and other brain tumors in 2023.

During 2022, we or external investigators filed applications or began recruiting for five internally or externally funded clinical trials in the US and Europe.

Additionally, we are in discussions with research institutions in the US, Asia, and South America regarding possible externally funded trials or programs involving WP1066 and WP1122.

1 Subject to publishing final Clinical Study Report

2 In discussions of “no cardiotoxicity” of Annamycin, management’s beliefs are based on an expert’s opinion based their review of certain clinical trial subject data including LVEF, ECHO strain analyses, and cardiac biomarkers – troponin’s I & T

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In terms of developing preclinical data, we have our own lab and consultants with our employees conducting research and, we sponsor research at MD Anderson to expand the science of our core technologies and possible combinations with other approved drugs. We have a National Institutes of Health or NIH funded preclinical study with WP1096 (from the WP1122 portfolio) for the treatment of the Tacaribe Arenavirus.

As summarized below, we and our external investigators have an IND/CTA in process, approved, are in progress, or have completed eleven internally and externally funded clinical trials. Additionally, we are anticipating additional clinical trials in 2023. See the following discussion for more detailed information, especially on safety and human activity.

3This is a summary of the detailed discussion below and does not include compassionate use/right-to-try usage of our drug candidates. Terms are defined elsewhere in this document including “internal” versus “external” funding. Additionally, “Met safety endpoints” means that no drug-related serious and unexpected adverse events occurred as defined in the trial protocol. All data presented are preliminary unless a CSR has been issued for the trial referenced. With regard to safety and human activity summaries please see the detailed discussion below.

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Human Activity

The following data regarding human activity are all from Phase 1 studies, except where noted as early Phase 2 data. Such information is early in the clinical trial process. Such activity may or may not be repeated in future Phase 2 or 3 clinical trials. While we believe such data is encouraging, the FDA or its foreign counterpart will ultimately determine if such data and future data is individually conclusive.

Three of our drug candidates have shown activity in humans to date.

• Annamycin has shown the following human activity:

• WP1066 has shown the following human activity:

• WP1220 (part of the WP1066 portfolio) has shown the following activity:

Funding Strategy

By “internally funded” we mean that the primary costs of the preclinical activity and clinical trials are funded and sponsored by us. By “externally funded” we mean that the preclinical work is performed by external collaborators and the clinical trials are physician-sponsored or IITs. For externally funded research, any grant funds that support such preclinical work or clinical trials and most of the associated expenses do not flow through our financial statements. For externally funded preclinical activities and clinical trials, we do provide drug product and other supporting activities for which costs are shown in our financial statements.

Additionally, we are seeking collaborative partners to further clinical research on all three of our core programs.

Working Environment

Our headquarters and laboratory are in Houston, Texas, and our workforce, as of year-end 2022, consisted of nineteen full and part-time employees, in the US and Europe, which are leveraged with other service providers and contractors worldwide working in a primarily virtual environment, even prior to the COVID-19 pandemic. We do not have manufacturing facilities and all manufacturing activities are contracted out to third parties. Additionally, we do not have a sales organization. Our overall strategy is to seek the best value for our shareholders either via potential outlicensing or collaborative opportunities with other pharmaceutical companies with existing marketing, sales and distribution or via the development of contracted marketing, sales and distribution capability if and when our drugs are approved.

The spread of COVID-19 caused significant volatility in US and international markets, including Poland, where we conduct some of our clinical trials, and Italy, where our Annamycin drug supply is produced. In 2022, there was limited temporary interruption of our drug supply, and the ability to monitor activities were limited at most Polish clinics where we are conducting trials. Although, most of the impact of the pandemic appears to have abated, this continues to be a volatile situation that could continue to improve or worsen at any time. Some of our European sites still cite the lack of staff as a reason for slow recruitment. Furthermore, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, including the impact on the US and international economies and, as such, we are therefore unable to determine if those circumstances will have a material impact to our operations.

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Additionally, war, terrorism, geopolitical uncertainties (such as the current war in Ukraine) and other business interruptions could cause damage to, disrupt or cancel the conduct of our clinical trials on a global or regional basis, which could have a material adverse effect on our business, clinical sites, drug suppliers or vendors with which we do business. Such events could also decrease the availability of subjects interested or able to enroll in our clinical trials or make it difficult or impossible for us to deliver products and services to our clinical investigational sites. In addition, territorial invasions can lead to cybersecurity attacks on technology companies, such as ours, located outside of the conflict zone. In the event of prolonged business interruptions due to geopolitical events, we could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume our business or clinical operations. While having operations in neighboring Poland, we have no operations directly in Russia or Ukraine, but we do not and cannot know if the current uncertainties in these geopolitical areas, which are unfolding in real-time, will escalate and result in broad economic and security conditions or rationing of medical supplies or production facilities, which could limit our ability to conduct clinical trials or result in material implications for our business. In addition, our insurance policies typically contain a war exclusion of some description and we do not know how our insurers are likely to respond in the event of a loss alleged to have been caused by geopolitical uncertainties.

We cannot determine whether these events will materially impact our overall business and operations, recruitment, and our drug supply in the future.

Our Mission and Strategy

We are a clinical stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial4, based substantially on discoveries made at and licensed from MD Anderson in Houston, Texas. Three of our six drug candidates have shown human activity in clinical trials and are currently in Phase 1b/2 or Phase 2 clinical trials. Since our inception, our drugs have been in, are currently in, or have received approval to proceed in eleven clinical trials. With regard to viruses, preclinical work has demonstrated possible activity against COVID-19, HIV, Zika, and Dengue fever.

Our diverse pipeline of technologies was built around the recognition that many highly resistant tumors tend to have a common set of traits, including an increase in multidrug resistance mechanisms, an evasion of the natural immune system, a marked upregulation of certain key oncogenic transcription factors and an increased dependence on glycolysis for energy production. Many of these traits are also common to the replication of certain viruses and we believe each of these elements may be addressed by the unique and innovative mechanisms introduced by one or more of our three core technologies. As detailed within, although we have conducted a significant amount of preclinical and early-stage clinical work that we consider promising, there is no guarantee that any future study will be conducted or will be successful, or that our product candidates, if approved, will ultimately be successfully commercialized.

We believe our technologies may provide an opportunity to help the many patients in need of alternative therapies, both as single agents and in combination with numerous existing technologies that often fail as tumors present immediate or acquired resistance. We believe showing even modest improvements in hard-to-treat cancers and viruses may lead to approval pathways that may potentially reduce the time and capital required to ultimately realize success.

Our technology is licensed from MD Anderson via exclusive licenses, which are discussed in more detail below. In 2021, our then sublicensee, WPD Pharmaceuticals (WPD), announced their facilitation of a grant equivalent to $1.5 million to the Maria Sklodowska-Curie National Research Institute of Oncology (MSCNRIO) to fund a Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases. The grant-funded clinical trial, which has begun treatment of subjects, is led by Prof. Piotr Rutkowski, MD, PhD, Head of Department of Soft Tissue/Bone Sarcoma and Melanoma at the MSCNRIO in Warsaw, Poland. As we continue to generate additional human data, we intend to pursue additional strategic collaborations on a regional basis for each of our drug candidates. Additionally, we are independently exploring other grant funded opportunities. In March 2023, WPD assigned their rights and duties related to the grant-funded trial at MSCNRIO to us as part of the termination of their sublicense as described further below.

This increase in potential outside funding should allow us to concentrate our internal resources primarily on Annamycin, alternate methods of delivery for WP1066, and WP1122. This allows us to prioritize our internal funding to core clinical trials that we think may lead to an approval pathway and/or a strategic licensing opportunity. Accordingly, we have increased our focus on clinical trial pathways for Annamycin, which is now in clinical trials for two different indications. We have now seen human activity in three drug candidates, some of which we think may be capable of supporting an approval pathway with continued positive developments in their respective clinical trials. Subject to database lock and completion of a CSR, we are concluding our internally funded WP1122 antiviral program which established an RP2D. This will potentially support future externally funded virology or oncology clinical trials. Additionally, an IND for the study of WP1122 in GBM went into effect in 2022 and we intend to identify investigators interested in collaborating on the potential oncology indications for this drug candidate.

Our Intellectual Property and FDA Designations

We have obtained worldwide, exclusive licenses from MD Anderson to issued US patents and pending US patent applications for each of our drug candidates, as well as pending foreign patent applications or issued foreign patents. With respect to certain patents or patent applications, we are co-owners with MD Anderson, in which instances we have exclusively licensed MD Anderson’s rights in those patents or patent applications. Where MD Anderson has sole ownership of patents licensed to us, MD Anderson is responsible for the prosecution and maintenance of those patent applications, with input from us and at our expense. Where MD Anderson jointly owns patent applications with us, we are responsible for prosecution and maintenance of those patents and patent applications at our expense. As new discoveries arise with respect to our drug candidates, we and MD Anderson seek to protect our rights to those inventions by filing new patent applications. There can be no assurance that patent applications will issue as patents or, with respect to issued patents, that they will provide us with significant protection.

Issued patents generally expire 20 years after their filing date, subject to adjustment or extension under certain circumstances. For instance, the expiration of US patents may be adjusted to account for prosecution delays, if any, by the United States Patent and Trademark Office (USPTO). Some jurisdictions, including the US and countries belonging to the European Patent Convention, will extend the expiration of an unexpired patent for an approved pharmaceutical product by some portion of time required for clinical development and regulatory review. We intend to seek patent term extensions for patents for our product candidates where available. In addition, certain pharmaceutical regulatory bodies, including the US FDA and the European Medicines Agency (EMA), provide some period of exclusivity for new pharmaceutical products independent of patent protection. In the US, regulatory exclusivity can range from three (3) years for a product with a previously approved active pharmaceutical ingredient to seven (7) years for a novel product designated as an Orphan Drug.

We have obtained Orphan Drug designation (ODD) from the FDA for Annamycin for the treatment of AML and STS; for WP1066 for the treatment of GBM; and, for WP1122 for the treatment of GBM. We have other FDA designations as discussed below. Detailed discussion of potentially relevant regulatory exclusivities can be found under Regulatory Exclusivities below.

The following provides a general description of our patent portfolio and is not intended to represent an assessment of claim limitations or claim scope.

4 WP1122 Phase 1 Clinical Study Report has not been published and safety results are preliminary.

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Annamycin

We have pending patent applications directed to the synthetic processes for lyophilized Annamycin and for reconstitution of our Annamycin drug product candidate. We have exclusively licensed MD Anderson’s rights in these applications, which are co-owned by MD Anderson and us. The applications are pending in jurisdictions worldwide, including but not limited to Australia, Brazil, Canada, China, European Patent Organization, Japan, Israel, India, South Korea, Mexico, and the US. Both applications have a filing date of June 25, 2020. We also have rights to a patent application, filed on November 23, 2020, directed to the use of Annamycin for the treatment of certain lung cancers.

p-STAT3 Inhibitors

WP1066. We have rights to four issued US patents for WP1066. These patents claim WP1066 and other molecules, as well as methods of treating disease using WP1066. Foreign counterparts to the US patents are issued in Canada, China, Europe, Israel, India, Japan and South Korea. These patents have an international filing date in December 2004, and in certain instances have had the patent term adjusted. We also have rights to a patent application directed to the combination of WP1066 with checkpoint inhibitors.

WP1220. We have rights to three issued US patents which claim compositions of WP1220, as well as foreign counterparts issued in China, Eurasia, Europe, Japan, Mexico, New Zealand, Singapore and Ukraine. These patents have an international filing date in June 2009. In addition, we have rights to an issued US patent for the treatment of skin disorders using WP1220, with a filing date in September 2009.

WP1122

We have rights to an issued US patent with claims to compositions of WP1122 and methods for treating cancer using WP1122, with an international filing date in June 2009. We also have rights to foreign counterparts issued in China, Europe, and Japan. In addition, we have rights to US and foreign patent applications directed to the treatment of viral diseases with WP1122 and other anti-metabolites including WP1096 and WP1097, with a filing date in March 2021.

FDA Designations

To further enhance our intellectual property, we have the following FDA designations for our drug candidates as shown. The importance of these designations is discussed further below in the section titled Regulatory Exclusivities.

Annamycin Yes – AML, Soft Tissue Sarcoma Yes – AML, Soft Tissue Sarcoma No

WP1122 Yes - GBM Yes - GBM No

Our Drug Candidate Programs

Annamycin Program

Overview

We consider Annamycin to be a "next generation" anthracycline, unlike any currently approved anthracyclines, as it is designed to avoid multidrug resistance mechanisms and cardiotoxicity, recognizing that the efficacy of all currently approved anthracyclines is limited by both multidrug resistance and cardiotoxicity. Our preclinical studies support this intended design and an independent expert in chemotherapy-associated cardiotoxicity at the Cleveland Clinic issued a report indicating no signs of cardiotoxicity in our three Phase 1 Annamycin clinical trials in forty-two subjects, as recently as November 2022. Additionally, we reported from our clinical trials evidence that Annamycin may have a substantially lower incidence of alopecia (hair loss) than currently prescribed anthracyclines.

The FDA granted ODD to Annamycin for the treatment of AML and for soft tissue sarcomas, which means the agency believes we have established a medically plausible basis for using the drug for those indications. The FDA also granted FTD for Annamycin for both the treatment of AML and STS lung metastases. A drug that receives FTD is eligible for some or all of the following:

Annamycin Clinical Trials – R/R AML

A Phase 1 clinical trial of Annamycin as a single agent for the treatment of relapsed and refractory (R/R) AML in the US was successfully concluded in 2020. The FDA requested that we demonstrate that Annamycin could be safely administered to subjects up to the lifetime maximum allowable level of anthracycline (LTMAD) established by the FDA and the trial met this primary endpoint. The FDA established the LTMAD because of concerns about cardiotoxicity associated with currently approved anthracyclines when administered above the LTMAD. An updated independent safety review in late 2022 of certain preliminary data of the first forty-two subjects in our three Annamycin clinical trials (treating both AML and STS lung metastases) concluded there was no evidence of cardiotoxicity. Thirty-two of the forty-two subjects reviewed (across three of our trials – MB-104, MB-105 and MB-107), following administration of Annamycin, received more than the LTMAD and none have shown evidence of any cardiotoxicity per our expert review.

As a part of our ongoing sponsored research at MD Anderson, animal testing has indicated that the combination of Annamycin with Ara-C (AnnAraC) provides a synergistic effect that is more effective in AML mouse models than either drug alone. These data were presented at the 62nd Annual Meeting & Exposition of the American Society for Hematology (ASH) under the title: "High Efficacy of Liposomal Annamycin (L-ANN or L-Annamycin) in Combination with Cytarabine (AnnAraC) in Syngeneic p53-null AML Mouse Model."

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This study was conducted in a highly aggressive AML mouse model where median survival is approximately 13 days. For animals treated with AnnAraC, median survival ranged from 56 to 76 days, thus expanding median survival by 585%, with some animals having no signs of any tumors after treatment. Additionally, when looking at median overall survival (OS) for the mice in the study, AnnAraC demonstrated a 68% improvement in the OS compared to Annamycin as a single agent and a 241% increase in OS compared to Cytarabine alone. We believe these experiments support initiation of clinical development of the combination of Annamycin and Ara-C in AML patients.

Although Annamycin has already shown human activity as a single agent in its two Phase 1 AML clinical trials and has shown no signs of cardiotoxicity, the observed synergy in vitro and confirmatory in vivo data suggest that the AnnAraC could be more effective in a clinical setting than Annamycin as a single agent. This would be consistent with the current practice to use Ara-C in combination with other anthracyclines. The current first-line therapy for AML patients is the combination of an anthracycline and Ara-C in a regimen referred to as "7+3" where Ara-C is administered daily for 7 days in parallel with 3 daily doses of an anthracycline. Simply substituting Annamycin for the currently used anthracycline in a similar 7+3 regimen would represent a familiar and well-practiced treatment modality. Beyond that, we believe it would have the added advantages that Annamycin has been shown in published research to be active against tumor cells resistant to doxorubicin and, importantly, has the potential to remove the concern for cardiotoxicity, a significant toxic side effect of currently used anthracyclines. Thus, we are now focusing our efforts on an AnnAraC trial for the treatment of AML in Europe.

As a result of discussions with the FDA, we focused our continuing efforts on establishing an RP2D for Annamycin in our Phase 1/2 single agent R/R AML clinical trial in Europe. In February 2022, we successfully concluded the Phase 1 portion of that trial and established the RP2D of 240 mg/m2. In the final cohort, five subjects received a full course of Annamycin and demonstrated an ORR of 80% with three partial responses (PRs) and one complete response with incomplete recovery of neutrophils and/or platelets (CRi). In two of the PRs the BMA's were below 5% but were still designated as a PR by the sub-investigator at that site. In light of the preclinical research suggesting that the combination of AnnAraC may be more effective for R/R AML patients than Annamycin as a single agent, we have elected to begin the process of commencing a Phase 1/2 clinical trial in Europe evaluating AnnAraC rather than to expend resources on the expansion (Phase 2) arm of the single agent trial. These preclinical animal studies showed that AnnAraC was 68% more effective (median overall survival or OS) than Annamycin as a single agent and 241% more effective than Cytarabine alone. Such preclinical results may not be replicated in human clinical trials.

We have been and intend to continue reporting top-line results by cohort in all of our Annamycin clinical trials, with each announcement also including an update on any other related trials. Top-line results will include reporting of any drug-related adverse events (AEs) and assessment of cardiotoxicity, including ECHO (echocardiogram) scans measuring change in ejection fraction and measuring certain blood troponin levels, which is considered a biomarker for potential long-term cardiovascular impairment. Top-line results will also include the number of partial responses (PRs), complete responses (CRs) and subjects deemed capable of progressing to a potentially curative bone marrow transplant, which we term "bridge to transplant" (BTs), each of which is essentially a function of the magnitude of reduction in a subject's BMA. For purposes of these clinical trials, a CR means that the subject's BMA reduced to 5% or less with recovery of neutrophils (or white blood cells) and platelets, CRi means a CR where there was incomplete recovery of neutrophils and/or platelet counts, a PR means the subject's BMA reduced by 50% and resulted in a blast count of 25% or less, and a BT means subjects are deemed capable of progressing to a potentially curative bone marrow transplant.

Annamycin Clinical Trials – STS Lung Metastases

We announced in April 2019 that our ongoing sponsored research at MD Anderson demonstrated that Annamycin can significantly improve survival in an aggressive form of triple negative breast cancer metastasized to the lungs in animal models. We know that Annamycin was previously shown to be significantly more potent than doxorubicin in both Lewis lung carcinoma in animal models or in vivo and small cell lung cancer in vitro models. In addition to seeing activity in animal models of triple negative breast cancer metastasized to the lungs, we are also seeing activity in colon cancer metastasized to the lungs. The particular animal models used in our testing are considered to represent very aggressive forms of cancer.

Furthermore, a poster entitled, "Liposomal annamycin inhibition of lung localized breast cancer," was presented at the San Antonio Breast Cancer Symposium held in December 2019. The published poster (https://www.moleculin.com/san-antonio-bc-symposium-poster/) shows substantially increased survival in both triple negative breast cancer and colon cancer lung metastases animal models. It should also be noted that treatment with Annamycin resulted in long-term survival of a significant number of animals, even when cancer was reintroduced into the animals post initial treatment, suggesting the development of beneficial immune memory. A reduction in tumor growth was demonstrated as well as a reversal of tumor activity resulting in an almost complete reduction of tumor burden. Such preclinical results may not be replicated in human clinical trials.

We announced in early 2021 that Annamycin demonstrated consistently high antitumor activity in tested animal models of different types of lung-localized cancers, including sarcoma. These promising findings correlate with a high uptake of Annamycin to the lungs in animal models. We found in our studies that the Annamycin uptake is over 30-fold higher than that of doxorubicin, the primary first-line chemotherapy for soft tissue sarcoma. The limited pulmonary uptake of doxorubicin in animal models may help explain its limited activity against STS lung metastases in humans. Additionally, our clinical data to date show no cardiotoxicity associated with the use of Annamycin, and the published research demonstrate Annamycin’s ability to avoid multidrug resistance mechanisms, both of which are often treatment-limiting effects of anthracyclines (which includes doxorubicin) in this setting. Taken together, these factors suggest that Annamycin could represent an important treatment to help address a significant unmet need in patients with STS lung metastases.

In February 2021, we announced that a preclinical study in animals has suggested a possible significant therapeutic benefit of Annamycin against metastatic osteosarcoma. As of day 130 of the study, the survival rate for animals treated with Annamycin was 100%, compared with only 10% for untreated animals. Computerized tomography scans demonstrated that animals treated with Annamycin exhibited suppression of tumor growth and not a single death was observed in the treated animals, whereas observed tumor burden was believed to have contributed to the rapid death of 90% of untreated animals. We believe these data are a promising indication of the possibility of Annamycin’s impact on other cancers metastasized to the lungs. We caution that these are preclinical animal data and we can provide no assurance that we will see similar results in our clinical trials, let alone ultimately obtain approval of Annamycin for this use.

It is estimated that there are approximately 36,000 new cases of STS in the seven major markets (US, EU5 and Japan) each year. Our clinical advisors estimate that approximately half of all STS patients will eventually develop lung metastases from their primary tumor. Although first-line treatments such as surgical resection, chemotherapy and radiation may provide initial therapeutic benefit for approximately one third of those patients, there are no approved or emerging second-line therapies for the remaining patients who relapse or are refractory. Although the lungs tend to be a major site of relapse, when we began our own clinical trial using Annamycin against STS lung metastases, we were aware of only a very few active clinical trials specifically targeting STS lung metastases, indicating that Annamycin currently faces limited competition in this area of development.

Along with the results in STS lung metastases, our animal models have shown activity in other lung metastases, including osteosarcoma, colorectal and triple negative breast cancer, as well as meaningful concentration levels of Annamycin in the liver, spleen and pancreas. Additionally, when tested in a highly aggressive AML mouse model, Annamycin significantly reduced tumor burden in the spleen, lungs and liver, leading to an increase in survival. Based on these promising preclinical data, we believe the ultimate market opportunity for Annamycin could be larger than just STS lung metastases. As such, we may expand our clinical trials into these areas in the near term using externally funded trials.

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In December 2020, the FDA allowed our IND to go into effect to study Annamycin for the treatment of soft tissue sarcoma lung metastases. This allowed us to begin a Phase 1b/2 clinical trial in the US for subjects with STS lung metastases after first-line therapy for their disease. The trial began in the first half of 2021.

In 2022, we expanded the fourth cohort due to a dose limiting toxicity (DLT) and then in late 2022, we concluded the Phase 1b portion of the study. Fifteen subjects were enrolled and treated per the protocol in four cohorts to determine the maximum tolerable dose and/or the RP2D and followed for safety and efficacy. Each cohort had three subjects, except for the fourth cohort, which (per the protocol) was expanded to six subjects after a DLT occurred in a single subject. The Company concluded the Phase 1b portion after the fourth cohort of 390 mg/m2 was documented to be safe. Based on findings from the Phase 1b position of the trial, 360 mg/m2 demonstrated it may be tolerated by subjects initially, however continued treatment was deemed at risk to be delayed or interrupted due to adverse events (primarily myelosuppression, which is anticipated with high doses of anthracycline therapy), hence lowering the dose from 360 mg/m2 to 330 mg/m2 was contemplated in advance of beginning the Phase 2 expansion pending results from the first three subjects in the RP2D evaluation phase. Adverse events (AE), primarily myelosuppression, in the first three subjects at 360 mg/m2 led us to lower the RP2D to 330 mg/m2 in October 2022, which we believe will enable continued treatment of subjects with fewer interruptions.

The median progression free survival time in patients with soft tissue sarcoma with metastases (not just lung metastases which is believed to be even shorter) that have failed initial systemic therapy is approximately 1.6 to 2.0 months, without effective therapy which includes subjects treated with a placebo. (A. Comandone, F. Petrelli, A Boglione, S. Barn: Salvage Therapy in Advanced Adult Soft Tissue Sarcoma. The Oncologist 2017;22:1518–1527) In this context, we believe Annamycin has the potential to bring a new and effective treatment option to patients with this significant unmet need.

In the fifteen subjects treated per protocol in the escalating dose cohorts, there was an overall response rate in nine subjects or 60% – defined as stable disease or better in the subjects STS lung metastases after at least two cycles of Annamycin (approximately six weeks). Our median progression free survival (PFS) was 2.6 months in the Phase 1 portion of the study. PFS will be monitored in the Phase 2 portion, as well. This data is encouraging but preliminary and may not be borne out by further study.

To date in the Phase 2 portion of the study, fourteen subjects have been identified, recruited, or dosed out of a total planned twenty-five to twenty-eight subjects. Of these eleven have begun receiving doses and six have been dosed two cycles and received their end of cycle two scans. Four of these or 67% were noted as stable disease or better with one of the subjects continuing with the study drug. The main reason for subjects not continuing is due to myelosuppression due to the study drug, keeping in mind that most of these subjects have had multiple prior treatments for STS and some have received close to the LTMAD prior to entering the study. All four subjects will continue to be monitored for PFS while in the study. The one subject continuing with the study drug has not experienced myelosuppression. We have recently discussed with investigators that they may reduce the dose of the study drug after the first cycle, per the protocol, as to possibly allow more subjects to continue receiving the study drug. This data is preliminary and subject to change.

The Importance of Lower Cardiotoxicity of Annamycin Versus Other Anthracyclines

We have received multiple reports from an independent expert cardiology assessment and the last such report in late 2022 continued to confirm the absence of any cardiotoxicity relating to treatment with Annamycin in our three Phase 1 clinical trials to date. To be clear, where we mention “no cardiotoxicity” of Annamycin, management’s beliefs are based on this expert’s opinion based on their review of certain clinical trial subject data. The expert’s report updated the independent safety review of certain preliminary data for the first forty-two subjects in our Annamycin clinical trials in the US and Europe targeting AML and the STS lung metastases which concluded there was no evidence of cardiotoxicity. The expert’s reviews included analysis of ejection fraction, echo strain and certain troponin levels (I & T) intended to assess the potential for both acute and chronic heart damage. We believe these expert reports are particularly relevant in light of a recently published retrospective study showing that the incidence of heart failure more than doubles for cancer patients treated with anthracyclines compared to cancer patients not receiving anthracyclines (C Larson, et al. Anthracycline and Heart Failure in Patients Treated for Breast Cancer or Lymphoma, 1985-2010. JAMA Network Open. 2023;6(2):e2254669. doi:10.1001/jamanetworkopen.2022.54669). With the subject population that we are experiencing in our Annamycin trials (multiple prior therapies, many elderly), we believe that there is a high likelihood that a cardiac event will occur that we will not be able to disassociate from our study drug.

Additionally, we reported evidence that Annamycin may have a substantially lower incidence of alopecia (hair loss) than currently prescribed anthracyclines such as doxorubicin. Although 65%-92% of subjects treated with doxorubicin typically experience hair loss, the incidence to date in subjects treated with Annamycin is less than 10% (Gonzalez et al. 2018; DOXORUBICIN HYDROCHLORIDE -package insert. New York, NJ: Pfizer Injectables; 2019). Alopecia is considered an important factor in quality of life for many cancer patients.

Chemotherapy continues to be a cornerstone of cancer therapy. Despite the progress made with immunotherapy and precision medicine, the first-line treatment for many cancers continues to include chemotherapy. And, in part because of the emphasis placed on alternatives to chemotherapy, we believe that not enough has been done to improve chemotherapeutic agents to make them safer, especially with regard to cardiotoxicity (damage to the heart), and more effective. Anthracyclines are a class of chemotherapy drugs designed to destroy the DNA (by creating iron-mediated free oxygen radicals, damaging the DNA and cell membranes, and inhibiting topoisomerase II) of rapidly reproducing cancer cells. Acute leukemia is one of a number of cancers that are usually treated with anthracyclines. In the case of acute leukemia, anthracyclines are typically used in “induction therapy,” where the goal is often to induce sufficient remission of patients’ blood-born tumor cells to allow for a potentially curative bone marrow transplant.

Two key factors limit the safety and effectiveness of anthracyclines: cardiotoxicity and multidrug resistance. We believe Annamycin may significantly reduce the impact of these two factors. If early human data from the clinical activity thus far are borne out, of which there can be no assurance, Annamycin may ultimately provide clinically meaningful benefits over currently approved anthracyclines in treating certain cancers. Preliminary data from very early-stage clinical trials suggest acute leukemia as a potentially opportune indication in which to further study Annamycin.

One of the key dose-limiting toxicities associated with currently available anthracyclines (including the anthracycline in the approved drug, Vyxeos) is the propensity to induce life-threatening heart damage (also known as cardiotoxicity). This is a particularly significant risk for pediatric leukemia patients, whose life spans can be severely shortened by the induction therapy intended to cure them of acute leukemia. In the animal model recommended by the FDA as an indicator of human cardiotoxicity, the non-liposomal (free) form of Annamycin has been shown to be significantly less likely than doxorubicin to create heart lesions in mice, and the liposomal formulation (L-Annamycin) has been shown in these same models to have reduced cardiotoxicity. If this same characteristic continues to be shown in humans, it may allow Annamycin to be used more aggressively to help patients achieve remission. This would be especially valuable in the case of pediatric acute leukemia (both AML and ALL) because of the potential impact of cardiotoxicity on long-term survival. In our clinical trials for Annamycin, we are collecting data to further validate the design intent of Annamycin to have no cardiotoxicity as reviewed by our expert review.

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In addition, the effectiveness of currently approved anthracyclines is limited by their propensity for succumbing to “multidrug resistance.” This can occur where, as a natural defense mechanism, transmembrane proteins acting as transporters (one type of which is referred to as a “P-glycoprotein pump” or “ABCB1 transporter”) develop on the outer surface of cells to expel perceived threats like anthracyclines. In many instances, the likelihood of cardiotoxicity (and other serious side effects) prevents increasing the dosing of current therapies in order to overcome multidrug resistance. As a result, most patients cannot receive current anthracyclines in doses that are adequate to produce lasting remission and thereby qualify for a bone marrow transplant. A laboratory study has suggested that Annamycin may resist being expelled by P-glycoprotein pumps and similar multidrug resistance transporters, which may mean the drug circumvents multidrug resistance. Although significant further study is necessary, this characteristic has been shown in pre-clinical testing to allow for higher drug uptake in diseased cells, which we believe could allow for more effective induction therapy with less risk to the patient, especially in relapsed patients.

We are also collaborating with WPD and physicians in Poland and are currently pursuing a physician-sponsored clinical trial in Europe. WPD announced their facilitation of a grant equivalent to $1.5 million USD to the Maria Sklodowska-Curie National Research Institute to fund a Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases. The grant-funded clinical trial will be led by Prof. Piotr Rutkowski, MD, PhD, Head of Department of Soft Tissue/Bone Sarcoma and Melanoma at the Maria Sklodowska-Curie National Research Institute of Oncology (MSCNRIO) in Warsaw, Poland, and it will be operated independently of our study in the US. The trial will have a dosing regimen of once per week rather than once every 21 days as in the US trial. This trial began dosing subjects in late 2022. To date, two subjects have been dosed in Cohort 1 (35 mg/m2) with no DLTs nor activity noted with recruitment continuing. In March of 2023, WPD assigned their rights and duties related to the grant-funded trial at MSCNRIO to us as part of WPD’s termination of their sublicense as described further below.

The WP1066 Portfolio Program

We have a license agreement with MD Anderson pursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights related to our WP1066 Portfolio and its close analogs, molecules targeting the modulation of key oncogenic transcription factors. In 2019, the FDA granted ODD for WP1066 for the treatment of glioblastoma, which means the agency believes we have established a medically plausible basis for using the drug to treat glioblastoma.

We believe our WP1066 Portfolio (including lead drug candidates WP1066 and WP1220), represents a novel class of agents capable of hitting multiple targets, including the activated form of a key oncogenic transcription factor, STAT3. A substantial body of published research has identified STAT3 as a master regulator of a wide range of tumors and has linked the activated form, p-STAT3, with the survival and progression of these tumors. For this reason, it is believed that targeted inhibition of p-STAT3 may be an effective way to reduce or eliminate the progression of these diseases. Since 2021, we have been working on developing an appropriate IV formulation for WP1066 or its analogs. As a result of these studies, we believe that the lead molecule WP1066 may be our best candidate for intravenous administration or additional oral avenues and efforts to identify and optimize the best strategy for delivery are currently underway. We also determined that the stability of WP1732, another molecule in the WP1066 Portfolio was less than satisfactory and, as such, in March 2021 we terminated our license for WP1732 with MD Anderson. We however retain an option to re-license WP1732 from MD Anderson in the future.

The high level of anticancer activity demonstrated in multiple tumors in animal models by WP1066 is potentially related to its ability to also inhibit such important key oncogenic transcription factors such as c-Myc and HIF-1α. In addition to direct anticancer effects not related to the function of the immune system, our lead drug candidate WP1066 has also been shown to boost immune response in animals, in part by inhibiting activity of TRegs, which are coopted by tumors to evade the immune system. We believe the dual effect of (1) directly inhibiting tumor growth and inducing tumor cell death and (2) separately boosting and directing the natural immune response to tumors is therapeutically promising. If additional preclinical and clinical data validate these two avenues of apparent activity, this class of drugs may be well-suited to treat a wide range of tumors, both as single agents and as critical elements of successful combination therapies targeting even some of the most difficult-to-treat cancers.

The recent oncology drug landscape has been dominated by immunotherapy, specifically including checkpoint inhibitors. In the last 5 years, checkpoint inhibitors (such as Opdivo and Keytruda) have reached over $10 billion in annual revenues. To summarize checkpoint blockade therapy, the T-Cells within an individual’s own immune systems should be capable of identifying tumor cells and destroying them before they destroy the individual. Unfortunately, tumors develop the ability to prevent this natural immune response by regulating the expression of certain receptors referred to as “immune checkpoints” that then bind to T-Cells and prevent them from attacking the tumor. Immune checkpoint inhibitors are antibodies that block these receptor mechanisms and allow the T-Cells to act normally and attack the tumor.

In certain types of tumors, like melanoma, checkpoint inhibitors work well, and the results can be impressive, creating durable suppression of tumors where no other therapy had succeeded. However, despite the outstanding results in select patients, checkpoint inhibitors benefit only a limited number of patients in certain cancers, and they are essentially not effective in what are called “non-responsive” tumors like glioblastoma and pancreatic cancer, among others. As a result, companies are now focusing heavily on combination therapies, combining immune checkpoint inhibitors with chemotherapy, as well as other agents. We believe there is a need for new chemotherapeutic agents that, by their specific mechanism of action, would produce potent combination effects with immune checkpoint inhibitors, and that additionally can boost immune system response on their own. In this regard, there is early preclinical evidence that WP1066, as a single agent, may have the ability to reverse immune tolerance in brain tumor patients (Cancer Res, 67(20), 9630, 2007), and preliminary data in animal models that suggests WP1066 may have a potential for combination use with checkpoint inhibitors. We intend to pursue additional study to build on this preclinical evidence and preliminary animal model data.

Published research papers have presented several findings that may point to new opportunities for our WP1066 class of drugs. One such article suggested that our STAT3 inhibitor WP1066 abrogated PD-L1/2 expression in cancer cells and may be a useful agent in addition to checkpoint inhibitor immunotherapy in cancer patients (J Clin Exp Hematop, 57(1), 21-25, 2017). Other published results show that CTLA4-induced immune suppression occurs primarily via an intrinsic STAT3 pathway, suggesting that, through its inhibition of activated STAT3, WP1066 might work well in combination with this checkpoint inhibitor (Cancer Res, 77(18), 5118–28, 2017).

A separate paper presents selected key transcription factors as being responsible for the upregulation of an often-targeted checkpoint actor in tumors known as PD-L1. Some of the most important transcription factors identified were HIF-1α, c-Myc and STAT3, the very targets for which WP1066 was designed (Front Pharmacol, 2018 May 22, 9:536, doi: 10.3389/ fphar.2018.00536, eCollection 2018).

WP1066

WP1066 is our flagship Immune/Transcription Modulator. It has been the subject of over 50 peer-reviewed articles and its activity against p-STAT3 has now been validated in independent labs around the world. This discovery was inspired by a naturally occurring compound (caffeic acid) in propolis (from honeybees). Caffeic acid has shown a natural ability to inhibit p-STAT3, which is considered a master regulator of inflammatory processes that support tumor survival and proliferation.

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WP1066 has exhibited an ability to inhibit other key oncogenic transcription factors, including c-Myc and HIF-1α. A critical characteristic of WP1066 and its analogs is the ability to inhibit p-STAT3 independently of upstream cell signaling. We believe this overcomes the limitations of many other drugs designed to inhibit STAT3 activity by blocking upstream receptors.

Another important attribute of WP1066 (unlike some of our other Immune/Transcription Modulators) is its apparent ability in pre-clinical testing to cross the blood brain barrier, which we believe makes it a good candidate for potentially treating brain tumors and other malignancies of the central nervous system. WP1066 has shown significant anti-tumor activity and increased survival in a wide range of tumor cell lines and animal models.

As with other analogs in this portfolio, WP1066 also has a demonstrated in animal models the ability to boost a natural immune response to tumor activity. In animal models, WP1066 has been shown to upregulate STAT1, a transcription factor associated with immune stimulation. At the same time, it has been shown to reduce levels of Regulatory T-Cells, or TRegs, which are coopted by tumors to protect themselves from attack by the patient’s natural immune system. This forms a unique dual action (directly attacking the transcription factors that support tumor development and separately boosting the natural immune response to tumors) that may make WP1066 uniquely suited to treat a wide range of tumors and may also serve as an important element in combination therapies targeting some of the most difficult cancers.

In vitro testing has shown a high level of activity for WP1066 against a wide range of solid tumors, and in vivo testing has shown significant activity against head and neck, pancreatic, stomach, and renal cancers, as well as metastatic melanoma and glioblastoma, among others. In vivo testing in mouse tumor models indicates that WP1066 inhibits tumor growth, blocks angiogenesis (a process that leads to the formation of blood vasculature needed for tumor growth) and increases survival.

Our own sponsored research and published findings from independent researchers point to the possibility that administration of WP1066 could lead to improved treatment results in many patients receiving checkpoint inhibitor therapy. Additionally, in April 2019 we announced that preclinical data supporting activity of our STAT3-inhibiting Immune/Transcription Modulators was presented by Dr. Waldemar Priebe, our co-founder and chair of our Scientific Advisory Board, at the 2019 Annual Meeting of the American Association for Cancer Research (AACR) in Atlanta, GA. The abstract (AACR Abstract: https://www.moleculin.com/inhibition-of-stat3-in-pancreatic-ductal-adenocarcinoma-and-immunotherapeutic-implications/) and the presentation included data resulting from preclinical evaluation in pancreatic cancer models of the STAT3 inhibitor WP1066. In vitro efficacy of this inhibitor was assessed using proliferation and apoptosis induction assays in a panel of patient-derived and commercially available Pancreatic Ductal Adenocarcinoma (PDAC) cell lines. WP1066 was shown to be potent and to induce apoptosis and inhibit p-STAT3 and its nuclear localization in all tested PDAC cell lines. Observed IC50 values ranged from 0.5 to 2 μM. Importantly, WP1066 shows in-vivo efficacy in preliminary experiments when tested alone or in combination with T cell immune checkpoint inhibitors.

Clinical Trials for the WP1066 Portfolio

At the 2019 annual meeting of the Society for Neuro Oncology (SNO), Emory University researchers reported encouraging activity in animals with their in vitro pediatric brain tumor models using WP1066. Based on these data, they filed and received clearance to proceed with an IND for a trial to treat children with recurrent or refractory malignant brain tumors with WP1066. This trial is being conducted at the Aflac Cancer & Blood Disorders Center at Children's Healthcare of Atlanta.

In February 2023, the Emory trial for pediatric brain tumors concluded treating three subjects in the three cohorts of the Phase 1 dose escalation portion of physician-sponsored clinical trial for the treatment of pediatric brain tumors with WP1066. The third cohort dosing was deemed safe at 8mg/kg. In that trial, one of the subjects in the first cohort with DIPG showed an apparent response to the treatment with both clinical improvement and radiologic reduction of tumor size. We caution that this is preliminary data, and no conclusions should be drawn from this single event. It is our belief that Emory will continue with its study of WP1066 into a Phase 2 program later this year.

WP1220

An analog of WP1066, referred to as WP1220, was previously the subject of an IND (WP1220 was referred to as “MOL4239” for purposes of this IND) related to use of the molecule in the topical treatment of psoriasis. Clinical trials were commenced on WP1220 in the US but were terminated early due to limited efficacy in the topical treatment of psoriatic plaques. Notwithstanding its limitations in treating psoriasis, our pre-clinical research in multiple CTCL cell lines has suggested that WP1220 may be effective in inhibiting CTCL. Based on these data, we are pursuing discussions with various pharmaceutical companies for further development of this molecule. CTCL is a potentially deadly form of skin cancer for which there are limited treatment options.

Clinical Activity WP1220

In August 2019, we completed full enrollment in a Phase 1b clinical trial in Poland to study WP1220 for the treatment of CTCL. Polish authorities approved our CTA for this use in January 2019, and the trial began enrolling subjects in March 2019. In February 2020, we announced the final data from our CTCL clinical trial of WP1220, which were published and presented by Dr. M. Sokolowska-Wojdylo in conjunction with the 4th Annual World Congress of Cutaneous Lymphomas in Barcelona, Spain on February 13, 2020. The final results supported the safety of topical WP1220 and demonstrated an improvement in the Composite Assessment of Index Lesion Severity (CAILS) score.

Mycosis Fungoides or MF, the most common variant of CTCL, is a disease with symptomatic, disfiguring skin lesions. STAT3, an oncogenic transcription factor, has been identified as a critical regulator of MF, whereby the activation of STAT3 through phosphorylation (p-STAT3) has been linked to tumor proliferation and suppression of immune responses. Preclinical testing demonstrated that WP1220, a synthetic compound, potently inhibits the activity of p-STAT3 and the growth of CTCL cell lines. This Phase 1 study was designed to demonstrate the safety and efficacy of WP1220 after topical treatment of CTCL.

Of five subjects enrolled, eleven lesions were assessed according to the CAILS scoring system. The only related AE was mild contact dermatitis in one subject that the Investigator deemed was not related to the drug. Four of the five subjects improved in CAILS scores on index lesions, with one exhibiting stable disease, with a median reduction of 56% (range 25-94%). Three of the subjects exhibited a PR. Improvement was noted within seven days of treatment initiation and maintained 1 month after discontinuation. Of the eleven lesions, 45% exhibited a CR or a 50% or more reduction in CAILS and 55% exhibited stable disease with 100% showing a clinical benefit. Independent dermatologic review based on photographic documentation was conducted and corroborated these findings.

Although this was a small proof-of-concept clinical trial, WP1220, topically applied, had no safety issues and appeared to be effective in MF. We believe this is the first demonstration in humans suggesting that inhibition of p-STAT3 with topical therapy may have efficacy in CTCL. As a result of this, we continue to actively seek third-party collaborations to begin a Phase 2 trial with approximately sixty subjects.

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Alternate Formulation for the WP1066 Portfolio

The topical application WP1220 does not appear to result in systemic exposure to the drug, which is desirable in the case of a topical drug targeting a dermatologic condition. WP1066, however, is currently administered orally, with an undesirable taste profile, with the intent of systemic uptake. Although preliminary data from physician-sponsored brain tumor trials indicate that the oral administration of WP1066 results in detectable levels of WP1066 in plasma, we believe our opportunity for successful development of a p-STAT3 inhibitor would be expanded if we were able to develop a compound capable of a different oral delivery or intravenous (IV) administration. In 2020, we began developing IV formulation methods for WP1066 that might address its lack of solubility. We also invested in research to identify molecular analogs that may be more soluble and, therefore, easier to develop for IV administration. Although we intend to continue our work toward a viable IV formulation of WP1066, there can be no assurance that this effort will be successful.

The WP1122 Portfolio Program

We have a license agreement with MD Anderson pursuant to which we have been granted a royalty-bearing, worldwide, exclusive license for the patent and technology rights related to our WP1122 Portfolio and similar molecules focused on inhibitors of glycolysis and glycosylation. These new compounds are designed to exploit the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to stop the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells. A key drawback to 2-DG is its lack of drug-like properties, including a short circulation time and poor tissue/organ distribution characteristics. Our lead Metabolism/Glycosylation Inhibitor, WP1122, is a prodrug of 2-DG that appears to improve the drug-like properties of 2-DG by increasing its circulation time and improving tissue/organ distribution. New research also points to the potential for 2-DG to be capable of enhancing the usefulness of checkpoint inhibitors. Considering that we believe 2-DG lacks sufficient drug-like properties to be practical in a clinical setting, we believe WP1122 has the opportunity to become an important drug to potentiate existing therapies.

We believe this technology has the potential to target a wide variety of solid tumors, which eventually become resistant to all treatments, and thereby provide a large and important opportunity for novel drugs. Notwithstanding this potential, we are currently focused on the use of WP1122 and related analogs for the treatment of central nervous system malignancies and especially glioblastoma multiforme. Although less prevalent than some larger categories of solid tumors, cancers of the central nervous system are particularly aggressive and resistant to treatment. The prognosis for such patients can be particularly grim and the treatment options available to their physicians are among the most limited of any cancer. The American Cancer Society has estimated 24,810 new cases of brain and other nervous system cancers will occur in the United States in 2023, resulting in 18,990 deaths (https://www.cancer.org/latest-news/facts-and-figures-2023.html - as of January 2023). Despite the severity and poor prognosis of these tumors, there are few FDA-approved drugs on the market.

Additionally, based on independent preclinical data, we believe that this technology has the potential to impact hard to treat viruses that also rely heavily on glycolysis and glycosylation. Due to the COVID-19 pandemic, we initiated development of the WP1122 portfolio with preclinical work on WP1122 for the treatment of COVID-19.

During 2020, we announced that in vitro testing corroborated the antiviral potential of WP1122, including for the SARS-CoV-2 virus responsible for COVID-19. Subsequently, we had written communications with the FDA regarding the clinical development of WP1122 for the treatment of COVID-19. Based on guidance from the FDA, we believed that we needed to demonstrate efficacy in a COVID-19 animal model in order to proceed with an IND for COVID-19 clinical trials in the US. At that time, availability of validated COVID-19 animal models was limited. For this reason, we evaluated opportunities to pursue COVID-19 clinical development outside the US. The IND-enabling preclinical work already completed for WP1122 is mostly similar to the preclinical work we originally planned as part of developing WP1122 for cancer indications. Accordingly, we filed and subsequently received clearance for an IND to study WP1122 in GBM as described below.

An early 2021 study in India of 2-DG in COVID-19 subjects was conducted by the Institute of Nuclear Medicine and Allied Sciences (INMAS), a lab of Defense Research and Development Organization (DRDO), in collaboration with Dr Reddy's Laboratories (DRL), Hyderabad, India. INMAS-DRDO scientists initiated a Phase 2 clinical trial on 2-DG in COVID-19 subjects in May 2020 during the first wave of the pandemic. This was followed by a Phase 3 study and an approval in May 2021, by Drugs Controller General India (DCGI) for emergency use of 2-DG as an adjunct therapy in subjects with moderate to severe COVID-19.

As per the interim available data, the Phase 2 trial reported a median time difference of 2.5 days to achieve normalization of specific vital signs parameters in the 2-DG arm when compared to Standard of Care (SoC). Subsequently, the Phase 3 trial was pursued which showed that a higher proportion of subjects improved symptomatically and became free from supplemental oxygen dependence in the 2-DG arm (42%) when compared to the SoC arm (31%) by the end of day three of treatment. ( Sahu KK, Kumar R. Role of 2-Deoxy-D-Glucose in COVID-19 disease: A potential game-changer. J Family Med Prim Care. 2021;10(10):3548-3552. Doi:10.4103/jfmpc.jfmpc_1338_21). Given that WP1122 is a prodrug of 2-DG designed to improve its circulation time and tissue/organ uptake, we consider this human data regarding 2-DG to be potentially relevant to the potential for WP1122 to be useful in treating COVID-19. The MHRA had access to this and other data in approving our CTA, as discussed below, and did not require an animal testing model.

Clinical Trial for COVID-19 with WP1122

On October 19, 2021, we announced that we received authorization from the MHRA to commence a Phase 1a clinical trial of WP1122 in the United Kingdom. The Phase 1a study in healthy human volunteers investigated the effects of a single ascending dose (SAD) and multiple days of ascending dosing (MAD) of WP1122 administered as an oral solution.

On October 14, 2022, we provided an update on the preliminary results from the second MAD cohort of our Phase 1a study of WP1122. This cohort consisted of an initial 4 subjects, who were scheduled to be dosed daily for 7 days with 64 mg/kg/day of WP1122 or placebo in the dose escalation trial evaluating the safety and PK of WP1122. In conjunction with the study SRC, we stopped the second MAD cohort when 2 subjects experienced non-serious adverse events that, although asymptomatic, met the stoppage criteria in the protocol. Although we considered the potential to open a third MAD cohort (2a) to dose subjects at a reduced dose level of 48mg/kg/day for 7 days, we subsequently determined that the primary objectives of this Phase 1a study had already been met by establishing a safe and tolerable dose and that continued testing with healthy volunteers would not be a wise use of resources.

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In late October 2022, after further review of the data and in discussions with our clinical team, we determined that the maximum tolerated dose (MTD) for WP1122 is a daily cumulative dose of 32 mg/kg in two divided doses for seven days, and we concluded the Phase 1a study of WP1122. We believe this will advance future studies of WP1122 in antiviral and oncology indications.

With an IND active for WP1122 for the treatment of glioblastoma and a COVID-19 investigator sponsored trial in Brazil in the approval process, we have concluded that advancing WP1122 in these indications will occur only if external funds are available. With respect to the COVID-19 investigator led trial in Brazil, we doubt that this trial will occur due to the current epidemiology of COVID-19. We will begin to close out the Phase 1a study and generate the clinical study report.

Potential Clinical Trial for GBM with WP1122

On December 1, 2021, we announced that the FDA allowed our IND application to study WP1122 for the treatment of GBM to go forward. With this IND now cleared, we plan to seek a partner to conduct an externally funded Phase 1 open label, single arm, dose escalation study of the safety, pharmacokinetics and efficacy of oral WP1122 in adult subjects with GBM. Such a trial would enable parallel development of WP1122 as a cancer therapy. Consistent with our strategy of leveraging external funding for many of our clinical trials, we intend to seek opportunities for an investigator-initiated clinical trial of WP1122 in cancer patients going forward. There is no assurance that we will be successful in finding an investigator with access to externally sourced funds.

Additionally, we will rely on external collaborations for testing other molecules in the WP1122 portfolio against other hard to treat viruses such as HIV, Dengue fever, and Zika.

Overview of The Market for Our Oncology Drugs

The American Cancer Society (https://www.cancer.org/latest-news/facts-and-figures-2023.html - as of January 2023) estimates that cancer continues to be the second most common cause of death in the US, after heart disease. A total of 1.9 million new cancer cases and 609,820 deaths from cancer are expected to occur in the US in 2023, which is about 1,670 deaths a day. These statistics do not include either basal cell or squamous cell skin cancers because US cancer registries are not required to collect information on these cancers. These numbers also do not account for the effect the COVID-19 pandemic has likely had on cancer diagnoses and deaths because they are projections based on reported cases through 2019 and deaths through 2020.

Market for Annamycin

Per the American Cancer Society, digestive, reproductive, breast and respiratory cancers comprise most of expected cancer diagnoses in 2023, while cancers like leukemia and brain tumors are considered “rare diseases.” Leukemia in particular, can be divided into acute, chronic and other, with acute lymphoblastic leukemia (ALL) and acute myeloid leukemia (AML) comprising 26,920 of the estimated 59,610 new cases expected in the United States in 2023. The National Cancer Institute estimates that cancer-related direct medical costs in the US were $208.9 billion in 2020, which is likely an underestimate because it does not account for the growing cost of treatment; for example, the list price for many prescription medicines is now more than $100,000 annually.

Our lead drug candidate, Annamycin, is in a class of drugs referred to as anthracyclines, which are chemotherapy drugs designed to destroy the DNA of targeted cancer cells. The approved anthracyclines most commonly used are daunorubicin and doxorubicin and, prior to the expansion of their generic equivalents, annual revenues generated from anthracyclines have been estimated to approximate $1 billion. Acute leukemia is one of a number of cancers that are treated with anthracyclines. One industry report estimates that annual drug revenues generated from the demand for AML-related therapies in the United States, United Kingdom, France, Germany, Italy and Spain were in the range of $153 million in 2016, and it is estimated that this number is increasing with the increase in approved AML treatments – estimated to rise to $1.6 billion by 2025. Of this worldwide amount, The US market is estimated to comprise the largest share.

Leukemia is a cancer of the white blood cells and acute forms of leukemia can manifest quickly and leave patients with limited treatment options. AML is the most common type of acute leukemia in adults. It occurs when a clone of leukemic progenitor white blood cells proliferates in the bone marrow, suppressing the production of normal blood cells. Currently, the only viable option for acute leukemia patients is a bone marrow transplant, also known as a hematopoietic stem cell transplant, which is successful in a significant number of patients. However, in order to qualify for a bone marrow transplant, the patient’s leukemia cells must be decreased to a sufficiently low level. This usually begins with a therapy referred to as “7+3,” which consists of combining seven injections of Cytarabine with 3 infusions of an anthracycline to induce remission (a complete response, or “CR”). This therapy had not improved since it was first used in the 1970s and we estimate that this induction therapy had a success rate of about 20% to 25%. A revision to this therapy was approved in the form of a drug called Vyxeos, which involves combining Cytarabine and an anthracycline (daunorubicin) into a single liposomal injection given 3 times. This improvement appears to have increased the level of CRs to 34% and the overall survival by 3.5 months. Unfortunately, the current clinically approved anthracyclines (including Vyxeos) are cardiotoxic (i.e., can damage the heart), which can limit the dosage amount that may be administered to patients. Additionally, the tumor cells often present de novo or develop resistance to the first-line anthracycline, through what is called “multidrug resistance,” enabling the tumor cells to purge themselves of the available anthracyclines. Consequently, in the majority of these patients there remains no effective therapy for inducing remission sufficient to enable a potentially curative bone marrow transplant and unfortunately most patients will succumb quickly to their leukemia. If a patient’s leukemia reappears before they can be prepared for a bone marrow transplant, they are considered to have “relapsed.” If a patient fails to achieve a sufficient response from the induction therapy to qualify for a bone marrow transplant, they are considered to be “refractory” (resistant to therapy).

Palliative care or focus on overall survival versus curative treatment has become the focus for patients not suitable for traditional chemotherapy. AbbVie’s Venclexta is approved by the FDA in combination with a hypomethylating agent (azacitidine or decitabine) or low-dose AraC (LDAC) for the treatment of newly diagnosed AML in patients who are 75 years of age or older, or for those ineligible for intensive induction chemotherapy due to co-existing medical conditions. While a confirmatory Phase 3 trial (VIALE-C) evaluating Venclexta + LDAC failed to meet an OS endpoint, a larger confirmatory trial evaluating Venclexta + azacitidine demonstrated a survival advantage (15 months vs 10 months) and supported regulatory approvals in the EU (May 2021) and Japan (March 2021).

Together, this group of relapsed and refractory AML patients constitutes our primary focus for treatment with Annamycin and our intent is to pursue FDA approval for Annamycin as a second-line induction therapy for adult relapsed or refractory AML patients.

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We believe that pursuing approval as a second line induction therapy for adult relapsed or refractory AML patients is the shortest path to regulatory approval, but we also believe that one of the most important potential uses of Annamycin is in the treatment of children with either AML or ALL (acute lymphoblastic leukemia, which is more common in children). Accordingly, we also intend to pursue approval for pediatric use in these conditions when practicable.

Soft tissue sarcoma is a broad term for cancers that start in soft tissues (muscle, tendons, fat, lymph and blood vessels, and nerves). These cancers can develop anywhere in the body but are found mostly in the arms, legs, chest, and abdomen.

The lungs are the most frequent site of metastasis from soft-tissue sarcomas. It has been estimated that as high as approximately 50% of the STS cases develop lung metastases. Effective systemic therapies for metastatic STS are currently limited; when possible, surgical removal of the lung metastases (known as pulmonary metastatectomy, PM) is the preferred treatment. However, guidelines for the performance of PM for STS do not exist and decisions to operate are often made on an individual basis (American Association for Thoracic Surgery (AATS). (2016, May 16). Increasing survival in soft tissue sarcoma patients with lung metastases undergoing resection. ScienceDaily. Retrieved March 3, 2023 from www.sciencedaily.com/releases/2016/05/160516181330.htm). Metastatectomy and/or chemotherapy are the most common treatments offered to patients with metastatic sarcoma. Pulmonary metastatectomy, either video-assisted or through a formal thoracotomy, has been shown to increase overall survival in select populations of both osseous and soft tissue sarcoma patients. The market is expected to grow as a result of factors like an increase in the patient pool.

We believe that the market size of STS with lung metastases in the seven major markets is expected to rise from $177 million in 2017 to reach $198 million by 2030. According to our estimates, the highest market size of STS with lung metastases was estimated in the United States, followed by Germany. The market of STS with lung metastases is categorized into first-line and second-line therapies. The therapies in first-line treatment involve surgery, off-label treatment, and stereotactic radiation therapy (SBRT). We estimate that around 80% of patients taking the first-line treatment due to relapse of the disease progress on to second-line treatment. Since we know of no approved or emerging therapies for treatment of relapsed/refractory patients, we believe that first-line therapies are often used again in second-line management. Other cancers metastasize to the lungs, including osteosarcoma, breast and colon cancers, for which the relapsed or refractory population is estimated to exceed 8,000 in the US. In addition, there are over 20,000 annual cases of testicular, thyroid, endometrial, renal and cervical cancers which metastasize to the lungs. Given this backdrop, we believe the best initial pathway for Annamycin is to pursue the second-line treatment of STS lung metastasis.

Per the American Cancer Society, in 2023, an estimated 64,050 new cases of pancreatic cancer will be diagnosed in the US and 50,550 people will die from the disease. While pancreatic cancer only accounts for 3.3% of all cancer diagnoses, it has the highest mortality rate of all cancers and is the third leading cause of cancer-related deaths in the US, behind lung and colon cancer. The most effective treatment for pancreatic cancer is surgery, but fewer than 20% of cases are eligible for a surgical approach. The 80% of non-resectable pancreatic cancers are typically treated with chemotherapy and other pharmacotherapies. Global sales of drugs used for the treatment of pancreatic cancer, including Abraxane, Lynparza and Tarceva, exceeded $3 billion in 2020, though this figure includes sales for treatment of other cancers as well. Abraxane will become generic in 2023 which should impact this number. There is a tremendous amount of clinical development activity in pancreatic cancer, with 551 trials ongoing, of which 32 were late-stage.

Market for Our WP1066 (STAT3) Portfolio

Our active development program for WP1066, has potential applications (among others) in the treatment of brain tumors, another rare disease for which there are few available treatments. The leading brain tumor drug is temozolomide, a drug introduced under the brand name Temodar. In 2012, one industry source reported annual revenues of approximately $882 million for Temodar before the expiration of its patent protection, at which point generic versions of the drug began to enter the market and reduce prices.

WP1066 is our most published asset (over 50 peer reviewed articles), and we believe it is one of very few drug candidates in the market focused on the inhibition of p-STAT3, and that its mechanism of action is unique. Clinical research on WP1066 is currently focused on the treatment of adult GBM and childhood brain tumors, including DIPG. An industry recognized data source in late 2020 estimated that the incidence rate of primary malignant brain and central nervous system tumors in the US is 7.4 cases per 100,000 person-years. This translates to an incidence of approximately 20,000 cases of malignant brain cancer per year. It is estimated that more than 81,000 people were living with a diagnosis of primary malignant brain and central nervous system tumor in the United States in 2000. In Europe in 2002, 33,000 people were diagnosed with primary brain/CNS cancers, and of which 85-90% are brain tumors. Incidence in Asians is significantly lower and based on the results of several large epidemiological studies, we estimate a Japanese incidence of close to 3,000 a year. Gliomas (mainly glioblastoma and astrocytomas) account for 78% of malignant tumors.

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Diffuse Intrinsic Pontine Glioma (DIPG) - also called: Pontine Glioma or Brainstem Glioma – is a type of pediatric (6-9 years old) tumor that starts in the brain stem. These tumors are called gliomas because they grow from glial cells, a type of supportive cell in the brain. DIPG falls into the Glioma staging system, so they can be classified according to the four stages below based on how the cells look under the microscope. The grades are from the least severe to the most severe: Low Grade: Grade I or II means that the tumor cells are the closest to normal; and High Grade: Grade III or IV means that these are the most aggressive tumors. The main issue with DIPG is that most of these tumors are not classified by grade because biopsy or removal of the tumor is not safe because of the location of the tumor, so they are diagnosed by their appearance on MRI. Symptoms usually develop rapidly in the majority of subjects because of the fast growth of these tumors. The most common symptoms are issues related to balance and walking; eyes, chewing and swallowing, nausea and vomiting, headaches and facial weakness or drooping (usually one side). 10-20% of all pediatric gliomas are DIPG. DIPG impacts an estimated 200 to 400 children per year in the US alone. After diagnosis, median survival is usually nine months. Only 10% live for more than two years. When compared to pediatric glioblastoma, the prognosis for DIPG is the worst with less overall survival. There are no effective treatments for DIPG.

We believe there is a significant unmet need for an effective treatment for DIPG. While chemotherapy trials of over 200 drugs have not shown any impact on the disease, a DIPG subject in the first cohort of the Emory University study of WP1066 responded to treatment with both a radiologic reduction in tumor size and a clinical improvement in symptoms. While this is only an “n” of one, we believe the response is important and encouraging, especially since we believe this was a subtherapeutic dose level. In December 2020, we announced that the FDA had approved our request for a "Rare Pediatric Disease" designation for our drug candidate WP1066. The designation may entitle us to receive a transferrable Priority Review Voucher upon approval of an NDA for one of three indications, including DIPG, medulloblastoma and atypical teratoid rhabdoid tumor. We believe that the early activity we are seeing in WP1066 is both surprising and encouraging. The approval of these three Rare Pediatric Disease designations is a reminder of just how important our efforts are to potentially help children with brain tumors. These vouchers are issued upon drug approval of the rare disease indication from the FDA and once issued, can be transferred to other drug developers. PRVs have historically had significant value and management believes have a value up to $100 million or more.

Additionally, WP1220 which is in the WP1066 Portfolio, has shown activity in a clinical trial for the treatment of CTCL. CTCL is a neoplastic transformation of T-lymphocytes and most often occurs between the ages of 40 and 60. Unlike other forms of non-Hodgkin lymphoma, CTCL is initially manifested as skin lesions (mycosis fungoides "MF"), but later stages involve lymph nodes, circulating tumor cells in the blood, as well as viscera. MF is considered a low-grade cutaneous lymphoma which we estimate accounts for more than half of primary CTCLs. Early-stage MF (Stages I and II; ~70% of subjects) is generally treated with skin-directed treatments (topical therapy) using systemic drugs that do not have significant side effects as secondary treatments. Advanced-stage MF requires more aggressive (systemic) therapies due to more extensive involvement of tissues and organs. Treatment is based mainly on a recently published European Organization for Research and Treatment of Cancer (EORTC) guideline. A consensus guideline for clinical endpoints and response criteria to be incorporated into clinical trials was published. However due to the rarity of this disease, it has been difficult to perform randomized studies. There is currently no cure for this disease.

The incidence of CTCL is approximately 16,000 worldwide in 2020 (US + EU 48%) and estimated to be growing to 18,000 by 2026. Asia has the highest incidence (38%). Prevalence is estimated to be 42,000 in US & EU growing to 45,000 with prevalence in Japan growing to a total of 49,000 by 2026. Since this is a chronic disease, we believe introduction of a new topical therapy that is more effective and less toxic than currently available topical drugs (if that is what is shown) would be important to this market. The US market was estimated to represent $40 million in annual sales in 2020, yet consists of technologies that are as much as 40 years old. Our WP1220 proof of concept trial for the treatment of CTCL was conducted in 5 subjects, including the treatment of a total of 11 lesions and concluded with a lesion objective response rate (ORR) of 45%, no adverse events and 55% stable disease, resulting in 100% clinical benefit. 60% of the subjects responded with a PR. We believe that a significant unmet need remains for early stage (Stages IA through IIA) CTCL, and therefore, we believe a meaningful opportunity exists for WP1220.

Market for Our WP1122 Portfolio

Certain cancers depend heavily on glycolysis and glycosylation for growth and survival. Additionally, viruses depend on glycolysis and glycosylation for infectivity and replication. Glycolysis and glycosylation can be disrupted by using a glucose decoy known as 2-DG. While 2-DG has been shown to be effective in vitro and may have some activity in humans, its lack of drug-like properties limits its efficacy. Based on our preclinical testing in vitro (against cancers and viruses) and in vivo (against certain cancers only), WP1122 appears to improve the drug-like properties of 2-DG by creating a prodrug of 2-DG that reaches much higher tissue/organ concentrations than 2-DG alone. We believe WP1122 should be well suited as a treatment for highly glycolytic cancers such as GBM and pancreatic cancer.

In addition to the market for GBM described above, pancreatic cancer is a rare and difficult to treat form of cancer. Cancers of the pancreas are a very serious health issue in the United States where pancreatic cancer is the fifth leading cause of cancer deaths following breast cancer; lung cancer, colon cancer, and prostate cancer. Due to difficulties in diagnosis, the intrinsic aggressive nature of pancreatic cancers, and the sparse systemic treatment options available, only approximately 4% of patients diagnosed with pancreatic adenocarcinoma will be alive five years after diagnosis.

Our License Agreements

Sponsored Research and License Agreements with MD Anderson

We have licensed all of our technology from MD Anderson, and we also sponsor research there as well. Under license agreements associated with Annamycin, the WP1122 Portfolio, and the WP1066 Portfolio, we are responsible for certain license, milestone and royalty payments over the course of the agreements. Annual license fees, prior to the first sale of a licensed product, can be as high as $0.1 million depending upon the anniversary. Milestone payments for the commencement of phase II and phase III clinical trials can cost as high as $0.5 million. Other milestone payments for submission of an NDA to the FDA and receipt of first marketing approval for sale of a license product can be as high as $0.6 million. Royalty payments can range in the single digits as a percent of net sales on drug products or flat fees as high as $0.6 million, depending upon certain terms and conditions. Not all of these payments are applicable to every drug. Total expenses under these agreements were $0.3 million for the years ended December 31, 2022 and 2021, respectively. For more information about our license agreements, see Footnote 8 - Commitments and Contingencies included in our Consolidated Financial Statements set forth in this report.

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We have a sponsored research agreement with MD Anderson that currently runs until the end of December 2024. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. The expenses recognized under the agreements, mainly related to MD Anderson, were $1.1 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.

WPD Licensing Agreement

Since February 2019, we were party to a sublicense agreement with WPD Pharmaceuticals (WPD), pursuant to which we sublicensed to WPD certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio (as amended, the “WPD Agreement”). WPD is affiliated with Dr. Waldemar Priebe, our founder. Under the WPD Agreement, we granted WPD a royalty-bearing, exclusive license to research, develop, manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of human therapeutics under the licensed intellectual property in the countries of Poland, Estonia, Latvia, Lithuania, Belarus, Ukraine, Moldova, Romania, Armenia, Azerbaijan, Georgia, Slovakia, Czech Republic, Hungary, Uzbekistan, Kazakhstan, Greece, Austria, Russia, Netherlands, Turkey, Belgium, Switzerland, Sweden, Portugal, Norway, Denmark, Ireland, Finland, Luxembourg, Iceland (licensed territories).

In March 2023, we and WPD agreed to terminate the WPD Agreement. Pursuant to the termination, we agreed to pay WPD (or its designees) $700,000 in cash and shares of our common stock valued at $800,000. In connection with the termination, WPD agreed to assign all of its rights and obligations to us related to the Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases being conducted at Maria Sklodowska-Curie National Research Institute.

With the termination of the WPD Agreement, we now hold the worldwide rights to all of our licensed intellectual property, other than the rights related to non-human animals.

Animal Life Sciences Licensing Agreement

On February 19, 2019, we sublicensed certain intellectual property rights, including rights to Annamycin, our WP1122 portfolio, and our WP1066 portfolio in the field of non-human animals to Animal Life Sciences, LLC (ALI) (the “ALI Agreement”). ALI is affiliated with Dr. Waldemar Priebe, our founder. Under the ALI Agreement, we granted ALI a worldwide royalty-bearing, exclusive license to research, develop, manufacture, have manufactured, use, import, offer to sell and/or sell products in the field of non-human animals under the licensed intellectual property. This license is subject to the terms in the prior agreements entered into by the Company and MD Anderson.

During the term of the ALI Agreement, to the extent we are required to make any payments to MD Anderson pursuant to our license agreements with MD Anderson, whether a milestone or royalty payment, as a result of the research and development or sale of a sublicensed product, ALI shall be required to advance or reimburse us such payments. In further consideration for the rights granted by us to ALI under the ALI Agreement, ALI agreed to pay us a royalty percentage at a rate equal to the royalty rate we owe MD Anderson under our license agreements with MD Anderson plus an additional royalty equal to 5.0% of net sales of any sublicensed products. As additional consideration, ALI issued us a 10% ownership interest in ALI.

With certain exceptions, the ALI Agreement will remain in full force and effect until the expiration of the last patent within the sublicensed patents.

Corporate History

We were founded in 2015 by Walter Klemp (our chairman and CEO), Dr. Don Picker (our Chief Science Officer) and Dr. Waldemar Priebe of MD Anderson (Chairman of our Scientific Advisory Board) in order to combine and consolidate the development efforts involving several oncology technologies, based on license agreements with MD Anderson. Dr. Priebe is a Professor of Medicinal Chemistry in the Department of Experimental Therapeutics, Division of Cancer Medicine, at the University of Texas MD Anderson Cancer Center. This effort began with the acquisition of the Annamycin development project from AnnaMed, Inc. followed by the acquisition of the license rights to the WP1122 Portfolio from IntertechBio Corporation. Further, on behalf of Moleculin, LLC, we entered into a co-development agreement with Houston Pharmaceuticals, Inc., which culminated with the merger of Moleculin, LLC into MBI coincident with our initial public offering allowing us to gain control of the WP1066 Portfolio.

In June 2018, we formed Moleculin Australia Pty. Ltd., a wholly owned subsidiary to oversee pre-clinical development in Australia. The Australian government provides an aggressive incentive for research and development carried out in their country. We believe having an Australian subsidiary could provide a great opportunity for quality, pre-clinical and clinical development and reduce the overall cost of our continued drug development efforts.

On January 29, 2021, we completed a one-for-six reverse stock split of our shares of common stock and proportionate reduction in the number of authorized shares of common stock from approximately 72,000,000 shares to approximately 12,000,000. The reverse stock split was effected in accordance with the authorization adopted by our stockholders at our 2020 annual meeting of stockholders.

In July 2021, we formed Moleculin Amsterdam B.V., a wholly owned subsidiary, primarily to act as our legal representative for clinical trials in Europe for Moleculin Biotech, Inc.

Competition

We operate in a highly competitive segment of the pharmaceutical market, which market is highly competitive as a whole. We face competition from numerous sources including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions. Many of our competitors may have significantly greater financial, product development, manufacturing and marketing resources. Additionally, many universities and private and public research institutes are active in cancer research, and some may be in direct competition with us. We may also compete with these organizations to recruit scientists and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

The unmet medical need for more effective cancer therapies is such that oncology drugs are one of the leading class of drugs in development. These include a wide array of products against cancer targeting many of the same indications as our drug candidates. While the introduction of newer targeted agents may result in extended overall survival, we believe that induction therapy regimens are likely to remain a cornerstone of cancer treatment in the foreseeable future.

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There are a number of established therapies that may be considered competitive for the cancer indications for which we intend to develop our lead product candidate, Annamycin. A key consideration when treating AML patients is whether the patient is suitable for intensive therapy. The standard of care for the treatment of newly diagnosed AML patients who can tolerate intensive therapy is cytarabine in combination with an anthracycline (e.g., doxorubicin or daunorubicin), typically referred to as a “7+3” regimen. For some patients, primarily those less than 60 years of age, a stem cell transplant could also be considered if the induction regimen is effective in attaining a CR (Complete Response). The 7+3 regimen of cytarabine in combination with an anthracycline has been the standard of care for decades. A patient not suitable for intensive therapy may be offered the option for low-intensity therapy such as low-dose cytarabine, azacitidine or decitabine. It should be noted that, in the United States, these are not approved by the FDA for the treatment of AML patients and there remains no effective therapy for these patients or for relapsed or refractory AML, with the exception of some recently approved targeted therapies that have demonstrated a low level of activity for limited subgroups of AML patients. The initial focus for Annamycin development is in patients for whom the standard induction regimen has failed. Also, several major pharmaceutical companies and biotechnology companies are aggressively pursuing new cancer development programs for the treatment of AML.

A number of attempts have been made or are under way to provide an improved treatment for AML. Celator Pharmaceuticals reported Phase III clinical trial results for a new combined formulation of cytarabine and daunorubicin (commonly used induction therapy drugs) they call Vyxeos. This new liposome formulation provides a 5:1 ratio of cytarabine and daunorubicin in each of three injections. When compared with patients receiving 7 injections of cytarabine and 3 injections of daunorubicin (traditional 7+3 induction therapy), patients receiving Vyxeos achieved an average increase in overall survival of approximately 3.5 months (9.5 months compared with 6 months). Despite this extension of overall survival, Vyxeos did not reduce the toxic side effects of daunorubicin (including cardiotoxicity) and it failed to qualify a majority of patients for curative bone marrow transplant. With these results, Jazz Pharmaceuticals acquired Celator in 2016 and obtained FDA approval. More recently, a new drug called Venetoclax, has been approved for the treatment of AML, targeting patients over 75 years of age or not suitable for typical chemotherapy. We believe that such treatment is focused on overall survival and not complete remission or bridge to transplant.

Drugs attempting to target a subset of AML patients who present with specific gene mutations, such as one referred to as FLT3, have recently received FDA approval, but by definition serve only subsets of the AML population. Other targeted therapies are currently in clinical trials, as well as other approaches that include immunotherapy relying on other biomarkers, other attempts at improved chemotherapy and alternative approaches to radiation therapy. Other approaches to improve the effectiveness of induction therapy are in early-stage clinical trials and, although they do not appear to address the underlying problems with anthracyclines, we can provide no assurance that such improvements, if achieved, would not adversely impact the need for improved anthracyclines. A modified version of doxorubicin designed to reduce cardiotoxicity is in clinical trials for the treatment of sarcoma and, although this drug does not appear to address multidrug resistance and is not currently intended for the treatment of acute leukemia, we can provide no assurance that it will not become a competitive alternative to Annamycin. Although we are not aware of any other single agent therapies in clinical trials that would directly compete against Annamycin in the treatment of relapsed and refractory AML, we can provide no assurance that such therapies are not in development, will not receive regulatory approval and will reach market before our drug candidate Annamycin. In addition, any such competing therapy may be more effective and/or cost-effective than ours.

Soft-tissue sarcomas which have metastasized to the lungs are extremely difficult to treat. There are an estimated 13,600 new cases of soft-tissue sarcoma diagnosed each year, and of those that metastasize, approximately 70% of metastases occur to the lungs. The current standard of care consists of anthracycline therapy or newer-generation drugs such as pazopanib. However, only 20% of patients with STS lung metastases respond to these treatments. There are competitive efforts underway to develop new treatments for STS, including metastatic STS, but few specifically target STS metastases to the lungs.

Non-resectable pancreatic cancers are typically treated with chemotherapy and other pharmacotherapies, including Abraxane, Lynparza and Tarceva. While these products have been commercially successful, their success rates at treating pancreatic cancer are low and fatality rates remain high. This has led to a tremendous amount of clinical development activity in pancreatic cancer, with 551 trials ongoing, resulting in significant competition for pancreatic cancer patients among clinical trials, which could impact development timelines.

Several products have established efficacy for the treatment of SARS-CoV-2 infection and COVID-19, and the continued development of additional therapies has resulted in competition for patients in clinical trials. Products which have obtained approval, either on an emergency use basis or pursuant to full regulatory review, include antiviral antibody therapies from Lilly, Regeneron, GSK and AstraZeneca; small molecule antiviral drugs from Pfizer and Merck; and targeted anti-inflammatory drugs from Lilly and others. If proven to be effective against COVID-19, WP1122 would be expected to compete with other host-based therapies including targeted anti-inflammatory drugs.

Competition for other indications targeted for each of our drug candidates is described above.

Government Regulation

Government authorities at the federal, state and local level in the US, and in analogous levels in other countries extensively regulate, among other things, the development, testing, manufacture, quality control, safety, effectiveness, approval, labeling, packaging, storage, distribution, import, export, record-keeping, reporting, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. The pharmaceutical drug product candidates that we develop must be approved by the FDA before they may be marketed and commercially distributed in the US, and by regulators in other countries before being marketed and commercially distributed there.

In the United States, the FDA regulates pharmaceutical products such as our product candidates under the Federal Food, Drug, and Cosmetic Act and implementing regulations. Pharmaceutical products are also subject to other federal, state and local statutes and regulations. Obtaining regulatory approvals and complying with post-approval requirements generally is expensive, labor-intensive and time-consuming. Failure to comply with the applicable requirements may subject an applicant to administrative or judicial enforcement action, which could include refusal to permit clinical trials to be conducted, refusal to approve an application, withdrawal of an approval, issuance of a warning letter, product recall, product seizure, suspension of production or distribution, fines, refusals of government contracts, and restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

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Development and Approval

The process required by the FDA before a pharmaceutical product may be marketed in the US generally involves the following:

• Review of the product candidate by an FDA advisory committee, if applicable;

The development and approval process, as well as post-approval requirements and restrictions, require substantial resources, attention and effort, and the prospects for approval and continued compliance are inherently uncertain.

Preclinical Testing. Before testing any compound in humans in the US, a company must generate extensive preclinical data. Preclinical testing generally includes laboratory evaluation of product chemistry and formulation, as well as toxicological and pharmacological studies in animals to assess the product’s safety and activity. The preclinical work must be done in accordance with Good Laboratory Practice, or GLP, requirements, the Animal Welfare Act, and other applicable regulations. The sponsor must submit the preclinical data in an IND, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol. Unless the FDA notifies the sponsor otherwise, an IND becomes effective 30 days after receipt by the FDA, and the proposed clinical trial may begin. If it expresses concerns to the sponsor, FDA may impose a “clinical hold,” which precludes beginning the study until the issues are resolved. Similarly, once a study has begun, the FDA may impose a clinical hold suspending further activity, pending resolution of agency concerns. Accordingly, we cannot be sure that submission of an IND will result in a clinical trial beginning or that, once begun, a clinical trial will not be suspended or terminated.

IND Application. Clinical trials involve the administration of the product candidate to healthy volunteers or subjects with the targeted disease under the supervision of qualified investigators, generally physicians not employed by or under the clinical trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol for trials conducted in the US must be submitted to the FDA as part of the IND. Clinical trials must be conducted in accordance with FDA’s good clinical practice, or GCP, regulations, which are intended to safeguard study subjects and support the validity of the resultant data. Further, each clinical trial must be reviewed and approved by an independent institutional review board (IRB) at, or servicing, each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of study participants and for determining that the risks to study participants are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that each study subject (or his or her legal representative) must sign, and is responsible for monitoring the conduct of the study until completed.

Clinical testing. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Additionally, post-approval studies, also referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are often used to gain additional information about use of the product for its approved indication, and may at times be required by the FDA as a condition of approval.

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Clinical trials require submission of annual progress reports to the FDA, and certain events, especially safety-related information, may require making reports to the FDA, investigators, and/or the IRB, and can lead to suspension, modification, or cessation of ongoing trials. Accordingly, clinical trials may not be completed successfully within any specified period, if at all.

Concurrent with clinical trials, companies usually complete additional animal studies, develop additional information about the physical characteristics of the product candidate and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.

The sponsor of a clinical trial or the sponsor’s designated responsible party may be required to register certain information about the trial and disclose certain results on government or independent registry websites, such as ClinicalTrials.gov. Additionally, a manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.

NDA Submission and Review. The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the pharmaceutical product candidate, proposed labeling and other relevant information are submitted to the FDA as part of an NDA seeking approval to market the product. Under the Prescription Drug User Fee Act (PDUFA), as amended, the submission of an NDA is subject to the payment of a substantial fee, although the fee may be waived under certain circumstances, which may or may not be applicable to us or our partners for any of our product candidates. In addition, under the Pediatric Research Equity Act, as amended, an NDA or supplement to an NDA generally must contain data to assess the safety and effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers depending on the designated pathway for submission.

The FDA first examines a submitted NDA to determine if the application is sufficiently complete to be accepted for review. If not, the agency may refuse to file the NDA, informing the sponsor of inadequacies to be addressed in a resubmitted application. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once an NDA is accepted for filing, the FDA begins an in-depth review of the application. Pursuant to goals established under PDUFA, the FDA aims to complete the review within 10 months of the 60-day filing date, which would be within 12 months of the date of submission, but that deadline is extended in certain circumstances, including by FDA requests for additional information or clarification.

The FDA also has programs intended to expedite the development and review of new drugs intended to treat serious or life-threatening conditions and address unmet medical needs and/or provide benefits over existing therapies. They include:

The availability of these programs is determined by the facts surrounding each specific product candidate, the disease or condition it is intended to treat, and the availability and characteristics of alternative treatments. Because those factors are subject to change, even if a product or application is granted designation for one (or more) of these programs, the benefits of the program may ultimately not be available. Additionally, the FDA may rescind designations for certain expedited programs (specifically, Fast Track and Breakthrough Therapy) if the agency determines the product candidate no longer meets the criteria for such programs.

The FDA review of an NDA focuses on determining, among other things, whether the proposed product candidate is safe and effective for its intended use, and whether the product candidate is being manufactured in accordance with cGMP to assure and preserve the product candidate’s identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA may also determine that a risk evaluation and mitigation strategy (REMS) is necessary to assure the safe use of the product. Among other things, a REMS can include restrictive conditions under which the product may be distributed, which may have a negative impact on the product’s commercial success. If the FDA concludes that a REMS is needed, the NDA sponsor must submit a proposed REMS, and the product will not be approved until FDA determines that the proposed REMS is adequate.

The FDA usually will inspect the facilities at which the product candidate is manufactured, and will not approve the product candidate unless the agency determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with IND study requirements and GCP. The NDA review process also includes evaluation of the proposed labeling, which is often the subject of significant back-and-forth between the sponsor and the agency.

The NDA review and approval process is lengthy and difficult, and may involve FDA requests for additional data or information, which may extend the process and/or lead the agency to refuse to approve the application. This is the case even if requested data or information are submitted, because data are not always conclusive and the FDA may interpret data differently than the sponsor does. If it decides not to approve an NDA, the FDA will issue a complete response letter, which usually describes the specific deficiencies in the NDA and may include recommended actions the applicant might take for the FDA to reconsider the application. The deficiencies may be minor, for example, requiring labeling changes, or more significant, such as requiring additional clinical trials. An applicant receiving a complete response letter may either revise and resubmit the NDA or withdraw the application.

FDA approval of an NDA may impose significant limitations that could weaken the commercial value of the product. This could take the form of a narrow indication or dosage, requiring the labeling to contain contraindications, warnings or precautions to address perceived safety issues, or mandating a REMS that significantly restricts or imposes burdens on how the product is distributed. Additionally, the FDA may require Phase 4 testing as a condition of approval. In particular, the FDA requires Phase 4 testing as a condition of accelerated approval, and may withdraw accelerated approval of a product if a sponsor fails to timely conduct such studies or if those studies fail to confirm safety or effectiveness. Such post-approval requirements can materially impact a product’s commercial prospects. Post-approval modifications to a drug product, such as changes in indications, labeling or manufacturing processes or facilities, may require development and submission of additional information or data in a new or supplemental NDA, which would also require prior FDA approval.

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Regulatory Exclusivities. The Orphan Drug Act provides incentives for the development of drugs intended to treat rare diseases or conditions, which generally are diseases or conditions affecting less than 200,000 individuals in the US. If a sponsor demonstrates that a drug is intended to treat a rare disease or condition, the FDA grants orphan drug designation (ODD) for the product for that use. The benefits of ODD include research and development tax credits and exemption from user fees, including the significant application fee otherwise required with submission of an NDA. A drug that is approved for an indication that is within the product’s orphan drug designation is granted seven years of orphan drug exclusivity (ODE). During that period, the FDA generally may not approve any other application for product with the same active moiety for the same use, although there are exceptions, most notably when the later product is shown to be clinically superior to the product with orphan drug exclusivity. A court decision in 2021 broadened the scope of ODE, but the ultimate impact of that decision is yet to be determined, as FDA has stated that it does not intend to apply the court decision to other products, and will instead continue to apply the narrower scope that has long been the agency’s approach.

ODD and ODE are also available from the European Union (EU). ODD in the EU is generally available for drug products intended to treat life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU when the application is made. If the orphan-designated product continues to meet the criteria for orphan designation at approval, the approval for an orphan-designated indication conveys a 10-year exclusivity period, during which the competent authorities in the EU may not accept another marketing authorization application and may not grant another marketing authorization for a similar medicinal product (i.e., a medicinal product with an identical active substance, or an active substance with the same principal molecular structural features and that acts via the same mechanisms) for the same therapeutic indication. The 10-year period can be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for the ODD, which can include if the product is sufficiently profitable not to justify market exclusivity. In the EU, ODE does not preclude granting a marketing authorization for a similar medicinal product for the same therapeutic indication, if that medicinal product is demonstrated to be safer, more effective or otherwise clinically superior, or if the company with orphan drug exclusivity is unable to supply sufficient quantities of the product.

Products that are approved to treat rare diseases that are serious or life-threatening and where the serious or life-threatening manifestations primarily affect patients under the age of 19 years of age may qualify for the Rare Pediatric Disease Priority Review Voucher (RPDPRV) program, in which the product sponsor receives upon approval a voucher for priority review of another product. The voucher can be used by the sponsor for a subsequent application that would not in its own right qualify for priority review, or it may be sold to another company for that use. In either case, a RPDPRV may have significant value. Under the current statutory sunset provisions for the RPDPRV program, after September 30, 2024, FDA may award a voucher for an approved rare pediatric disease product application only if the sponsor has rare pediatric disease designation for the drug, and that designation was granted by September 30, 2024. After September 30, 2026, FDA may not award any rare pediatric disease priority review vouchers.

We received ODD for Annamycin for the treatment of AML in 2018, and in 2020 for the treatment of soft tissue sarcomas, and Fast Track Designation for Annamycin for the treatment of relapsed or refractory AML in April 2019. We received ODD for WP1066 for the treatment of glioblastoma in 2019. If WP1066 is timely approved for the treatment of any of the following pediatric diseases, we may qualify for a Rare Pediatric Disease Priority Review Voucher: ependymoma, medulloblastoma, diffuse intrinsic pontine glioma, or atypical teratoid rhabdoid tumor, provided that related statutory sunset provisions are extended.

The federal Food, Drug and Cosmetic Act (FDCA) also provides for a grant of five-year exclusivity with approval of a product containing a new chemical entity (NCE), which generally means that the active moiety has never before been approved in any drug. During this exclusivity period, which runs from the date of the product’s approval, FDA may not accept for filing any Abbreviated New Drug Application (ANDA) for a generic version of the product or any 505(b)(2) NDA (generally anNDA that relies on data that are not the sponsor’s and for which the sponsor has not obtained a right of reference) for a product with the same active moiety. There are circumstances under which the follow-on application can be submitted at four years, and there are provisions that operate to preclude approval of the application for an additional period of time. Also, NCE exclusivity does not block approval of a “full” NDA (generally, an NDA in which the data are the sponsor’s or for which the sponsor has obtained a right of reference). The NCE exclusivity scheme is complicated and evolving; for that reason, although we believe that some of our products will qualify for five-year NCE exclusivity, we cannot be certain that will receive such exclusivity, or that if we do, the exclusivity will effectively protect our market position.

Post-Approval Requirements

Once approved, products are subject to continuing regulation by the FDA, including, among other things, cGMP compliance, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include standards for direct-to-consumer advertising, prohibitions on promoting pharmaceutical products for uses or in patient populations that are not described in the pharmaceutical product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities and promotional activities involving the internet. Although physicians may prescribe legally available pharmaceutical products for off-label uses, manufacturers may not directly or indirectly market or promote such off-label uses. If ongoing regulatory requirements are not met, or if safety or manufacturing problems occur after the product reaches the market, the FDA may at any time withdraw product approval or take actions that would limit or suspend marketing. Additionally, the FDA may require post-marketing studies or clinical trials, changes to a product’s approved labeling, including the addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if there are new safety information developments. Further, failure to comply with FDA requirements can have negative consequences including adverse publicity, enforcement letters from the FDA, actions by the US Department of Justice and/or US Department of Health and Human Services Office of Inspector General, mandated corrective advertising or communications with doctors, and civil or criminal penalties.

We rely and expect to continue to rely on third parties for the production of clinical and commercial quantities of our product candidates. Manufacturers of our product candidates are required to comply with applicable FDA manufacturing requirements contained in the agency’s cGMP regulations and related policies. The cGMP regulations require, among other things, adhering to requirements relating to organization and training of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical product manufacturers and other entities involved in the manufacture and distribution of pharmaceutical products are required to register their establishments with the FDA and certain state agencies and the FDA inspects equipment, facilities, and processes used in manufacturing pharmaceutical products prior to approval. The FDA and certain state agencies also conduct periodic unannounced inspections to re-inspect equipment, facilities, and processes for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Failure to comply with applicable cGMP requirements and conditions of product approval may lead the FDA to take enforcement actions or seek sanctions, including fines, issuance of warning letters, civil penalties, injunctions, suspension of manufacturing operations, operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution. Although we periodically monitor the FDA compliance of our third-party manufacturers, we cannot be certain that our present or future third-party manufacturers will consistently comply with cGMP and other applicable FDA regulatory requirements.

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Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or NDA sponsor, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Patent Term Restoration

If we receive FDA approval of our pharmaceutical product candidates, and depending upon the timing, duration and specifics of the FDA approval of the use of our pharmaceutical product candidates, some of our product candidates covered by US patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for the patent term lost during product development and the FDA regulatory review process for a product the approval of which is the first permitted commercial marketing of the active pharmaceutical ingredient. However, patent term restoration cannot extend the remaining term of a patent beyond a date 14 years after the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved pharmaceutical product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent unless an extension is obtained. The US Patent and Trademark Office, in consultation with the FDA, reviews and renders a decision on the application for any patent term extension or restoration. In the future, we may be able to apply for extension of patent term for one or more of our currently licensed patents or any future owned patents to add patent life beyond its current expiration date, depending upon the expected length of the clinical trials and other factors involved in the filing of the relevant NDA. We cannot be certain that any of our product candidate’s will qualify for patent term restoration or, if so, for how long the patent term will be extended.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical product candidates for which we may obtain regulatory approval. In the United States and in markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part upon the availability of reimbursement from third-party payers. Third-party payers include government payers such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. The process for determining whether a payer will provide coverage for a pharmaceutical product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the pharmaceutical product. Third-party payers may limit coverage to specific pharmaceutical products on an approved list, or formulary, which might not, and frequently do not, include all the FDA-approved pharmaceutical products for a particular indication. Third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. A payer’s decision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, in the United States there is a growing emphasis on comparative effectiveness research, both by private payers and by government agencies. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. To the extent other drugs or therapies are found to be more effective than our products, payers may elect to cover such therapies in lieu of our products and/or reimburse our products at a lower rate.

Different pricing and reimbursement schemes exist in other countries. In the European Community, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed upon. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular pharmaceutical product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any pharmaceutical product candidates for which we may receive regulatory approval for commercial sale may suffer if the government and third-party payers fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we may receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

International Regulation

In addition to regulations in the United States, we are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our future drugs. Whether or not we obtain FDA approval for a drug, we must obtain approval of a drug by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the drug in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized or mutual recognition procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states. The mutual recognition procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval.

In addition to regulations in Europe and the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial distribution of our future drugs.

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Employees

As of December 31, 2022 our workforce consisted of nineteen full and part-time employees devoting more than 20 hours per week, in the US. We leverage our work force with other service providers and contractors worldwide, working in a primarily virtual environment, even prior to the COVID-19 pandemic. Our workforce contained fifteen full-time employees and four part-time employees.

Access to Information

Our website is at www.moleculin.com. We make available, free of charge, on our corporate website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission (SEC). The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. Information contained on our website does not, and shall not be deemed to, constitute part of this Annual Report on Form 10-K. Our reference to the URL for our website is intended to be an inactive textual reference only.

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ITEM 1A. RISK FACTORS

Summary of Risk Factors:

Below is a summary of the principal factors that make an investment in our company speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, after this summary, and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision in our securities.

Risks Related to Regulatory Approval and the Development and Commercialization of our Drug Candidates

Risks Related to Our Intellectual Property

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Risks Relating to Our Business and Financial Condition

• We may incur penalties if we fail to comply with healthcare regulations.

Risks Relating to Our Common Stock

General Risks

• We have no intention of declaring dividends in the foreseeable future.

• Shareholder activism could cause material disruption to our business.

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The following risks and uncertainties should be carefully considered. If any of the following occurs, our business, financial condition or operating results could be materially harmed. An investment in our securities is speculative in nature, involves a high degree of risk and should not be made by an investor who cannot bear the economic risk of its investment for an indefinite period of time and who cannot afford the loss of its entire investment.

Risks Related to Regulatory Approval and the Development and Commercialization of our Drug Candidates

We are developing our drug candidates to treat patients who are extremely or terminally ill, and severe adverse outcomes, including patient deaths, that occur in our clinical trials could negatively impact our business even if such outcomes are not shown to be related to our drugs.

It is our intention to continue to develop our drug candidates focused on rare and deadly forms of cancer. Patients suffering from these diseases are extremely sick and have a high likelihood of experiencing adverse outcomes, including death, as a result of their disease or due to other significant risks including relapse of their underlying malignancies. Many patients have already received high-dose chemotherapy and/or radiation therapy, which are associated with their own inherent risks, prior to treatment with our drug candidates.

As a result, it is likely that we will observe severe adverse outcomes during our clinical trials for our drug candidates, including patient death. If a significant number of study subject deaths were to occur, regardless of whether such deaths are attributable to one of our drugs, our ability to obtain regulatory approval and/or achieve commercial acceptance for the related drug may be adversely impacted and our business could be materially harmed.

We are conducting important clinical trials in the US and Europe, and studies for additional countries in which to perform preclinical studies and clinical trials and the risks associated with conducting research and clinical trials abroad could materially adversely affect our business.

We have approved Clinical Trial Authorizations in Poland and Italy. Additionally, we are performing studies to determine if there are additional countries in which we should hold clinical and preclinical studies. Accordingly, we expect that we will be subject to additional risks related to operating in foreign countries, including:

• differing regulatory requirements in foreign countries;

• import and export requirements and restrictions;

• foreign taxes, including withholding of payroll taxes;

• difficulties staffing and managing foreign operations;

These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.

There are limited suppliers for active pharmaceutical ingredients (API) used in in our drug candidates and we utilize a single source for such API for certain of our drug candidates. Problems with the third parties that manufacture the API used in our drug candidates may delay our clinical trials or subject us to liability.

We do not currently own or operate manufacturing facilities for clinical or commercial production of the API used in any of our product candidates. We have no experience in API manufacturing, and we lack the resources and the capability to manufacture any of the APIs used in our product candidates, on either a clinical or commercial scale. As a result, we rely on third parties to supply the API used in each of our product candidates. For our lead product candidate, Annamycin, we currently utilize a single source to manufacture API, and if we were to lose this supplier, it could cause delays while we located a new supplier. We expect to continue to depend on third parties to supply the API for our current and future product candidates and to supply the API in commercial quantities. We are ultimately responsible for confirming that the APIs used in our product candidates are manufactured in accordance with applicable regulations.

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Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

Any of these events could lead to preclinical study and clinical trial delays or failure to obtain regulatory approval or affect our ability to successfully commercialize future products. Some of these events could be the basis for FDA or other regulatory authority action, including clinical holds, fines, injunctions, civil penalties, license revocations, recall, seizure, total or partial suspension of production, or criminal penalties.