On August 14, 2018 Sophiris Bio Inc. (NASDAQ: SPHS) (the "Company" or "Sophiris"), a biopharmaceutical company studying topsalysin (PRX302), a first-in-class, pore-forming protein, in late stage clinical trials for the treatment of patients with urological diseases, reported financial results for the second quarter 2018 and recent corporate highlights (Press release, Sophiris Bio, AUG 14, 2018, View Source [SID1234528933]).

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"In the second quarter, we announced top-line interim safety and biopsy data following a single administration of topsalysin from our ongoing Phase 2b clinical trial in low to intermediate risk localized prostate cancer," said Randall E. Woods, president and CEO of Sophiris. "The 29% (10/35 patients) clinical response rate we observed was extremely encouraging and provides the foundation for the next stage of development. We and our scientific advisors believe the initial data support advancing topsalysin for the treatment of localized prostate cancer into potential registration trials, and we will continue to evaluate the merits of administering a second dose. Looking ahead for the rest of the year, we are continuing our manufacturing activities to ensure drug supply for potential Phase 3 trials, we plan to advance dialogue with the regulatory agencies around a potential Phase 3 trial design in patients with localized prostate cancer and, once available, we will evaluate safety and biopsy data from the patients who received a second administration of topsalysin."

Second Quarter Corporate Highlights:

Positive top-line interim results from Phase 2b trial in localized prostate cancer. On June 25, the Company announced top-line safety and six month follow-up biopsy data from 35 patients with pre-identified, clinically-significant localized prostate cancer that were treated with a single administration of topsalysin.

Safety analysis, following a single administration of topsalysin in this study indicates that, to date, topsalysin has been well-tolerated; no hypersensitivity reactions or other serious systemic reactions to study medication have been observed after a single administration.

Based on the six-month follow-up biopsy results, 29% of patients (10/35) demonstrated a clinical response. Of the 10 clinical responders in the Phase 2b trial, six patients experienced a complete ablation with no histological evidence of the targeted tumor remaining. In addition, 37% of patients (13/35) experienced a partial response, but the targeted lesion was still deemed clinically-significant based on the targeted biopsy.

Two additional patients have received six-month follow-up biopsies following their first administration of topsalysin. The Company expects to report updated data following receipt of the results of these biopsies.

Independent Data Monitoring Committee recommendation to continue clinical trial as planned. In May 2018, an Independent Data Monitoring Committee (IDMC) met to review the safety data from all 38 patients administered a single dose of topsalysin as well the safety data available from the first seven patients who received a second administration of topsalysin. At that time, the IDMC unanimously recommended the clinical trial continue without changes to the protocol.

Second administration completed in Phase 2b trial. The Phase 2b study was designed to include an option to re-treat patients who did not have any clinically-significant adverse events and who responded to the first administration of topsalysin but still had a targeted lesion remaining.

Eleven patients received a second administration of topsalysin in the Phase 2b clinical trial. The eleventh patient died on the same day he received a second administration of topsalysin. The death did not occur during the procedure. As a precaution, Sophiris elected to halt further re-administration and no additional patients have received a second administration of topsalysin in the Phase 2b clinical trial. The event is under active review.

The Company expects to have six month follow-up biopsy results and additional safety data from all patients who received a second administration of topsalysin in its ongoing Phase 2b trial in localized prostate cancer patients late in the fourth quarter of 2018.

Financial Results:

At June 30, 2018, the Company had cash, cash equivalents and securities available-for-sale of $18.5 million and working capital of $14.1 million. The Company expects that its cash and cash equivalents will be sufficient to fund its operations through June 2019, assuming no new clinical trials are initiated. The Company will require significant additional funding to advance topsalysin in clinical development. As of June 30, 2018, the outstanding principal balance of our term loan was $7 million on which the Company is currently making monthly interest only payments.

For the three months ended June 30, 2018

The Company reported a net loss of $6.1 million or ($0.20) per share for the three months ended June 30, 2018, compared to net income of $0.6 million or $0.02 per share for the three months ended June 30, 2017. The net income for the three months ended June 30, 2017 was driven by a non-cash gain related to the revaluation of the Company’s warrant liability. See an additional discussion below related to this item.

Research and development expenses

Research and development expenses were $3.6 million for the three months ended June 30, 2018, compared to $1.4 million for the three months ended June 30, 2017. The increase in research and development costs is primarily attributable to increases in the costs associated with manufacturing activities for topsalysin, and to a lesser extent, an increase in clinical costs associated with our Phase 2b clinical trial of topsalysin for the treatment of localized prostate cancer.

General and administrative expenses

General and administrative expenses were $1.1 million for the three months ended June 30, 2018, compared to $1.4 million for the three months ended June 30, 2017. The decrease in general and administrative expense is primarily due to decreases in non-cash stock-based compensation expense and consulting services.

Gain (loss) on revaluation of the warrant liability

Loss on revaluation of the warrant liability was $1.4 million for the three months ended June 30, 2018, compared to a gain of $3.3 million for the three months ended June 30, 2017. As these warrants may require the Company to pay the warrant holder cash under certain provisions of the warrant, the Company accounts for these warrants as a liability, and the Company is required to calculate the fair value of these warrants each reporting date. The non-cash loss reported for the three months ended June 30, 2018, is associated with a increase in the fair value of the Company’s warrant liability from March 31, 2018, to June 30, 2018, which is calculated using a Black-Scholes pricing model. Certain inputs utilized in the Company’s Black-Scholes fair value calculation may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liability, which could also result in a material non-cash gain or loss being reported in the Company’s consolidated statement of operations and comprehensive loss.

For the six months ended June 30, 2018

The Company reported a net loss of $9.4 million or ($0.31) per share for the six months ended June 30, 2018 compared to a net loss of $2.0 million or ($0.07) per share for the six months ended June 30, 2017.

Research and development expenses

Research and development expenses were $6.9 million for the six months ended June 30, 2018 compared to $2.6 million for the six months ended June 30, 2017. The increase in research and development costs is primarily attributable to increases in the costs associated with manufacturing activities for topsalysin, and to a lesser extent, an increase in clinical costs associated with our Phase 2b clinical trial of topsalysin for the treatment of localized prostate cancer.

General and administrative expenses

General and administrative expenses were $2.3 million for the six months ended June 30, 2018 compared to $2.7 million for the six months ended June 30, 2017. The decrease in general and administrative expense is primarily due to decreases in non-cash stock-based compensation expense and consulting services.

Gain (loss) on revaluation of the warrant liability

Loss on revaluation of the warrant liability was $10 thousand for the six months ended June 30, 2018 as compared to a gain of $3.2 million for the six months ended June 30, 2017. The non-cash loss reported for the six months ended June 30, 2018, is associated with an increase in the fair value of our warrant liability from December 31, 2017 to June 30, 2018.