On May 10, 2016 Aptose Biosciences Inc. (NASDAQ:APTO) (TSX:APS), a clinical-stage company developing new therapeutics and molecular diagnostics that target the underlying mechanisms of cancer, reported unaudited financial results for the three months ended March 31, 2016 and reported on corporate developments (Press release, Aptose Biosciences, MAY 10, 2016, View Source;p=RssLanding&cat=news&id=2167184 [SID:1234512240]). Unless specified otherwise, all amounts are in Canadian dollars.

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Net loss for the three months ended March 31, 2016 was $5.1 million ($0.42 per share) compared with $3.6 million ($0.30 per share) during the three months ended March 31, 2015. Total cash and cash equivalents and investments at March 31, 2016 were $15.0 million.

"During the first quarter we made considerable progress towards developing an improved methodology to create a stable formulation of APTO-253 for returning to the clinic," said William G. Rice, Ph.D., Chairman, President and Chief Executive Officer. "Our team has diligently tested the performance of the drug product in the IV delivery system used for patients, as well as performed numerous manufacturing, formulation development and stability and solubility studies. We believe that we are close to defining a methodology that can deliver a clinical drug product of the utmost quality and functionality. We look forward to sharing our findings with the FDA, as we seek to re-initiate dosing at our existing Phase 1b clinical trial sites and initiating dosing at our new sites in patients with acute myeloid leukemia and other hematologic malignancies."

Corporate Highlights
During the first quarter, and in collaboration with a qualified formulation contract manufacturing organization (CMO), Aptose explored numerous methodologies to identify conditions that would enhance the solubility and stability properties of the APTO-253 formulation drug product.

The company has made significant progress toward selecting a formulation methodology to manufacture a new batch of drug product that is unlikely to cause clogging of the in-line filters in the clinical setting.

Aptose scientists demonstrated that, in addition to reversing the leukemogenic dysregulation of the KLF4 gene expression, APTO-253 inhibits expression of the c-Myc oncogene in a concentration and time-dependent manner in AML cells. The c-Myc oncogene is a major driver of cancer cell proliferation, and inhibition of c-Myc gene expression and c-Myc protein levels by APTO-253 suggests APTO-253 may have anti-cancer application among a host of hematologic malignancies and solid tumors.

Aptose’s clinical team has prepared additional clinical sites at major cancer research and treatment centers in preparation to enroll patients for dosing of APTO-253. The expedited engagement of these new sites is intended to ensure an accelerated pace of patient accrual in the company’s ongoing Phase 1b clinical study after lifting of the clinical hold.

Subsequent to the quarter end, the company issued 115,927 common shares under the at-the-market facility for gross proceeds of approximately US $297 thousand.
Financial Results
Net loss for the three months ended March 31, 2016 was $5.1 million ($0.42 per share) compared with $3.6 million ($0.30 per share) during the three months ended March 31, 2015. The increase in net loss is due to increased research and development costs related to APTO-253, as well as a foreign exchange loss on USD cash and cash equivalents balances due to the appreciation of the Canadian dollar during the quarter.
Aptose utilized cash of $4.5 million in operating activities in the three months ended March 31, 2016 compared with $2.2 million in the three months ended March 31, 2015. The increase in cash used in operating activities in the current period is due to an increased net loss compared with the prior year, as well as a reduction in accounts payable and accrual balances during the quarter compared with an increase in these balances in the three months ended March 31, 2015.
Research and Development
Research and development expenses totaled $2.3 million in the three months ended March 31, 2016 compared to $884 thousand in the prior year period. Research and development costs consist of the following:
Components of research and development expenses:
Three months ended
(in thousands) March 31,
2016 March 31,
2015

Program costs $ 2,247 $ 860
Stock-based compensation 56 19
Depreciation of equipment 12 5
$ 2,315 $ 884

The increase in research and development costs in the three months ended March 31, 2016 compared with the three months ended March 31, 2015 is due to the following reasons:
Costs associated with the LALS/Moffitt collaboration developing epigenetic single molecule inhibitors of multiple targets, including the bromodomain and extraterminal domain (BET) proteins, and other kinases for which no comparable expenses existed in the prior year;
Formulation and manufacturing costs associated with APTO-253 and the root cause analysis of the filter clogging identified in November 2015;
Increased Contract Research Organization costs related to consultants and advisors as the company works towards returning APTO-253 to the clinic; and
Increased research and clinical operations headcount.
Stock-based compensation costs allocated to research and development increased in the three months ended March 31, 2016 to reflect option grants to new employees.
General and Administrative
General and administrative expenses totaled $2.6 million for the three months ended March 31, 2016 compared to $2.7 million in the three months ended March 31, 2015. General and administrative expenses consist of the following:
Components of general and administrative expenses:
Three months ended
(in thousands) March 31,
2016 March 31,
2015

General and administrative excluding salaries $ 1,133 $ 1,029
Salaries 975 753
Stock-based compensation 479 940
Depreciation of equipment 21 7
$ 2,608 $ 2,729

General and administrative costs excluding salaries are higher in the three months ended March 31, 2016 compared with the prior year due to higher rent costs associated with an additional office location, additional patent costs due to timing, as well as a depreciation in the Canadian dollar compared with the prior year period which has resulted in an increase to the cost of our US dollar denominated expenditures.
Increased salary costs have increased in the three months ended March 31, 2016 compared with the prior year due to additional headcount, the establishment of a benefits plan for employees in the United States and higher Canadian dollar salary costs for our US employees due to the lower value of the Canadian dollar during the three month period.
Stock-based compensation costs decreased in the three months ended March 31, 2016 compared with prior year due to large option grants in June and July 2014 which vested 50% during the first year and therefore contributed to higher stock based compensation expense during the first twelve-month period.
Finance Expense
Finance expense for the three months ended March 31, 2016 was $196 thousand compared with $60 thousand for the three months ended March 31, 2015. Finance expense includes the following items:
Three months ended
(in thousands) March 31,
2016 March 31,
2015
Interest expense $ − $ 20
Foreign exchange loss 196 40
$ 196 $ 60

Interest expense for the three months ended March 31, 2015 relates to interest accrued at a rate of 10% on the remaining balance of convertible promissory notes issued in September 2013 as well as accretion expense related to the conversion feature of the notes. All of the promissory notes have now been converted into common shares.
Foreign exchange loss in the three months ended March 31, 2016 is the result of a decrease in the value of our US dollar denominated cash and cash equivalents balances during the period due to the appreciation of the Canadian dollar compared to the US dollar.
Finance Income
Finance income, consisting solely of interest income, totaled $47 thousand in the three months ended March 31, 2016 compared to $104 thousand in the three months ended March 31, 2015. Interest income represents interest earned on cash and cash equivalent and investment balances.

Aptose Biosciences Inc.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(unaudited)

Three Three
months ended months ended
(amounts in 000’s of Canadian Dollars except for per common share data) March 31, 2016 March 31, 2015
REVENUE $ - $ -

EXPENSES

Research and development 2,315 884

General and administrative 2,608 2,729

Operating expenses 4,923 3,613

Finance expense 196 60

Finance income (47 ) (104 )

Net financing income 149 (44 )

Net loss and comprehensive loss for the period 5,072 3,569

Basic and diluted loss per common share $ 0.42 $ 0.30

The press release, the financial statements and the management’s discussion and analysis for the quarter ended March 31, 2016 will be available on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml