On November 15, 2018 SELLAS Life Sciences Group, Inc. (Nasdaq:SLS) ("SELLAS" or the "Company"), a clinical-stage biopharmaceutical company focused on the development of novel cancer immunotherapies for a broad range of cancer indications, reported financial results for the quarter ended September 30, 2018 (Press release, Sellas Life Sciences, NOV 15, 2018, View Source [SID1234531355]).
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"Throughout the third quarter and in recent weeks, we made significant progress advancing our clinical development programs while also improving the Company’s financial standing. We strengthened our cash position with an equity offering in July and the recent settlement with JGB removed all outstanding debt while bringing an additional $6.6 million into the Company. Our Phase 1/2 galinpepimut-S (GPS) basket study in collaboration with Merck is progressing well and we are also further preparing for our registrational Phase 3 GPS trial in acute myeloid leukemia (AML) which we look forward to commencing in early 2019," said Angelos Stergiou, MD, ScD h.c., President and Chief Executive Officer of SELLAS. "We also continue to be excited about our nelipepimut-S (NPS, Neuvax) program in triple negative breast cancer (TNBC) patients as we review additional correlative data from the positive Phase 2b study. We have submitted a robust regulatory briefing to the FDA for review and hope to agree on the most optimal development program for NPS in TNBC in December while we continue our discussions with potential partners."
Third Quarter 2018 and Recent Business Highlights
Clinical Pipeline
During the third quarter, several clinical sites were activated in the planned Phase 1/2 open label five-arm basket type trial of galinpepimut-S (GPS) administered in combination with Merck & Co.’s PD-1 inhibitor, pembrolizumab (Keytruda), with patients currently being screened.
In October and November 2018, the Company reported on final data for nelipepimut-S (NPS, Neuvax). In October 2018, the independent Data Safety Monitoring Board concluded that the final positive data (median follow-up of more than 26 months) from the Phase 2b study of trastuzumab (Herceptin) +/- NPS in HER2 1+/2+ breast cancer patients confirmed the previously disclosed interim positive data (median follow-up of less than 19 months) in triple negative breast cancer (TNBC) patients. This positive final data was presented at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) 2018 Annual Meeting. The final Phase 2b study data revealed a clinically meaningful and statistically significant difference in favor of the active arm, NPS plus trastuzumab (vs. trastuzumab alone), in TNBC patients at 26 months with a p-value of 0.013 and a 75.2% relative risk reduction of relapse or death and showed no imbalances in safety between the active arm and the control arm. In November 2018, SELLAS announced additional data from a preplanned secondary efficacy analysis of the Phase 2b study data showing consistent clinical effect across HLA allele subgroups in TNBC patients, including the HLA-A24+ subgroup which is highly prevalent in the Asian population. This additional efficacy analysis showed a clinically meaningful and statistically significant benefit in the HLA-A24+ subgroup with a p-value of 0.003 and a 90.6% relative risk reduction of relapse or death in favor of the active arm, NPS plus trastuzumab. The Company is continuing to advance potential partnering discussions for NeuVax.
Regulatory
A meeting with the U.S. Food and Drug Administration (FDA) to discuss the most optimal regulatory pathway for further development of NPS in TNBC patients is scheduled to take place in December 2018.
In September 2018, SELLAS announced that the Committee for Orphan Medicinal Products of the European Medicines Agency approved orphan medicinal product designation for GPS for the treatment of multiple myeloma (MM).
In July 2018, SELLAS announced that the FDA granted Fast Track designation to GPS for the treatment of MM.
Corporate
In October 2018, the U.S. District Court for the Southern District of New York entered an order granting in full the Company’s motion to dismiss the complaint brought by JGB (Cayman) Newton, Ltd. (JGB) in connection with a senior secured debenture entered into by SELLAS’ predecessor while allowing SELLAS’ substantive counterclaims against JGB to remain. In November 2018, the Company announced that it had reached a settlement with JGB regarding the counterclaims. The Company received approximately $6.6 million in the settlement and the debenture and all related agreements, liens and security interests were terminated.
In July 2018, SELLAS completed an underwritten public offering of common stock and pre-funded warrants, together with accompanying common stock warrants, for aggregate net proceeds of approximately $21.6 million, after deducting underwriting discounts, commissions and offering expenses.
As of September 30, 2018, unrestricted cash and cash equivalents were $10.0 million compared to $2.3 million as of December 31, 2017.
Third Quarter 2018 Financial Results
For accounting purposes, SELLAS Life Sciences Group Ltd., a private Bermuda exempted company (SELLAS Ltd.), is considered to have acquired the Company (which was formerly known as Galena Biopharma, Inc. (Galena) in the business combination between SELLAS Ltd. and Galena (the Merger); therefore, upon the Merger, the financial statements of Galena became those of SELLAS Ltd. and the results reported are those of SELLAS Ltd. reflecting the acquisition of Galena as of December 29, 2017.
Cash Position: As of September 30, 2018, unrestricted cash and cash equivalents totaled $10.0 million which does not include a $6.6 million payment received by the Company that was related to the settlement of litigation with JGB in November 2018. Unrestricted cash and cash equivalents as of December 31, 2017 totaled $2.3 million.
Net cash used in operating activities was $25.9 million for the nine months ended September 30, 2018, which includes $4.3 million used to reduce payables related to the Merger. During the third quarter SELLAS received a total of $21.6 million in net proceeds, after deducting fees and expenses, from an underwritten public offering of common stock and pre-funded warrants, together with accompanying common stock warrants that was completed in July.
R&D Expenses: Research and development expenses were $1.7 million for the third quarter of 2018, as compared to $1.1 million for the third quarter of 2017. The increase was primarily due to the initiation of the Phase 1/2 clinical trial for GPS in combination with Keytruda and ongoing costs incurred during the third quarter related to the Phase 2b trial for NPS in combination with trastuzumab in breast cancer, as well as increased licensing fees resulting from our expanded clinical portfolio as a result of the Merger. This increase was partially offset by a reduction in stock-based compensation during the third quarter of 2018. Research and development expenses for the nine months ended September 30, 2018 were $5.1 million and were $5.1 million for the same period in 2017.
G&A Expense: General and administrative expenses were $1.3 million for the third quarter of 2018, as compared to $3.2 million for the third quarter of 2017. The decrease in the current period was primarily due to a reduction in stock-based compensation and the accounting treatment for costs related to litigation and other legal matters associated with the settlement of the JGB litigation and resulting reimbursement of legal fees. This decrease was partially offset by an increase in personnel related expenses, insurance and other expenses. General and administrative expenses for the first nine months of 2018 were $10.1 million, as compared to $9.4 million for the nine months ended September 30, 2017. The increase was primarily related to costs associated with outside services, accounting and audit expenses, insurance and public company costs, partially offset by a reduction in stock-based compensation and a decrease in financing and advisory fees associated with the Merger.
Net Loss: Net loss attributable to common stockholders was $9.4 million for the third quarter of 2018, or a basic and diluted loss per share attributable to common stockholders of $0.53, as compared to a net loss attributable to common stockholders of $4.5 million for the third quarter of 2017, or a basic and diluted loss per share attributable to common stockholders of $2.27. The increase in net loss was driven primarily by non-cash charges related to equity issuances during 2018.
Conference Call and Webcast Information
SELLAS will host a conference call and live audio webcast today at 8:00 a.m. ET to discuss these financial results and provide a business update. To participate in the conference call, please dial (866) 416-7995 (domestic) or (409) 217-8225 (international) and refer to conference ID 7038536. A live webcast of the call can be accessed under "Events & Presentations" in the Investors section of the Company’s website at www.sellaslifesciences.com. An archived webcast recording will be available on the SELLAS website beginning approximately two hours after the call.