NEUBASE THERAPEUTICS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Edgar Glimpses |

Our discussion and analysis of the business and subsequent discussion of financial conditions may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical in nature, including statements about beliefs and expectations, are forward-looking statements. Words such as "may," "will," "should," "estimates," "predicts," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties as described in greater detail in Item IA, Part II, our "Risk Factors" beginning on page 21 of this Report. You are cautioned that these forward-looking statements reflect management's estimates only as of the date hereof, and we assume no obligation to update these statements, even if new information becomes available or other events occur in the future, except as required by law. Actual future results, events and trends may differ materially from those expressed in or implied by such statements depending on a variety of factors, including, but not limited to those set forth in our filings with the Securities and Exchange Commission ("SEC"). Specifically, and not in limitation of these factors, we may alter our plans, strategies, objectives or business.

The financial information included in this Management's Discussion and Analysis of Financial Condition and Results of Operations is that of Ohr Pharmaceutical, Inc. prior to the Merger because the Merger was consummated after the period covered by the financial statements included in this Quarterly Report. Accordingly, the historical financial information included in this Quarterly Report, unless otherwise indicated or as the context otherwise requires, is that of Ohr Pharmaceutical, Inc. prior to the Merger.



Recent Developments



Merger


On , NeuBase Therapeutics, Inc. ("we," "us," "our," "NeuBase," or the "Company") completed a reverse merger transaction (the "Merger") with NeuBase Corporation, a Delaware corporation (formerly known as NeuBase Therapeutics, Inc.) ("Legacy NeuBase"). At the closing of the Merger, each outstanding share of Legacy NeuBase's capital stock was converted into the right to receive 1.019055643 shares of the Company's common stock. Upon completion of the Merger, the Company changed its name to NeuBase Therapeutics, Inc., and will focus on developing next generation gene silencing therapies to treat rare genetic diseases caused by mutant proteins. Shares of the Company's common stock commenced trading on the Nasdaq Capital Market under the ticker symbol "NBSE" as of market open on . The Company's previous ticker symbol was "OHRP".




Pre-Merger Financing



On , prior to the completion of the Merger, Legacy NeuBase completed transactions contemplated by certain financing agreements (the "Pre-Merger Financing") resulting in gross proceeds to Legacy NeuBase of approximately $9.0 million, consisting of (i) a private placement with certain accredited investors, whereby, among other things, Legacy NeuBase issued to such investors shares of Legacy NeuBase common stock for an aggregate purchase price of approximately $8.40 million (the "Legacy NeuBase Equity Financing") and (ii) the conversion of outstanding convertible notes of Legacy NeuBase with an aggregate principal amount of $600,000 (the "Legacy NeuBase Debt Financing"), which were automatically converted into Legacy NeuBase common stock immediately preceding the closing of the Legacy NeuBase Equity Financing at a conversion price equal to 90% of the purchase price per share of the Legacy NeuBase common stock issued in the Legacy NeuBase Equity Financing.



Post-Merger Financing


On , the Company completed a private placement with certain accredited investors for the sale by the Company of an aggregate 1,538,462 shares of the Company's common stock for aggregate gross proceeds of $5.0 million.



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Company Overview



We are a biotechnology company focused on developing the next generation of gene silencing therapies to treat rare genetic diseases caused by mutant proteins. The type of therapies that the Company is developing are termed antisense oligonucleotide therapies ("ASOs"), which are short single strands of nucleic acids (traditionally thought of as single stranded RNA molecules) which will bind to defective RNA targets in cells and inhibit their ability to be translated into defective proteins that cause disease. The Company is a leader in the discovery and development of the class of ribonucleic acid ("RNA")-targeted ASO drugs called peptide nucleic acids ("PNAs"). Its proprietary gamma Peptide-nucleic acid AnTisense OLigonucleotide ("PATrOL™") platform allows for a more efficient discovery of drug product candidates, potentially transforming the treatment paradigm for people affected by rare genetic diseases, with an initial focus on neurological disorders.

The PATrOL™ platform allows for a more efficient discovery of drug product candidates because the peptide backbone is rigid, and once strung together to form a series of backbone subunits, forms a single pre-organized structure. At a more detailed level, each molecule or subunit of the peptide backbone has only a single chiral center - a point in the chemical structure where the conformation of the backbone could fluctuate - and this chiral center is locked into one conformation and thus pre-organized to form only a single stereoisomer. A stereoisomer is a term used in the ASO therapeutics field to mean a string of backbone subunits (usually sugars or modified sugars) with nuclear bases attached that are put together into a specific sequence that matches the target sequence, but because of the nature of the backbone subunits used, the drug assumes various conformations often with varying affinity for the target sequence. These stereoisomers often require a manufacturing step to purify the heterogeneous mixture of conformations into a more homogenous mixture or even a single conformation of the drug in order to obtain the hoped-for therapeutic effect. Our PNAs assume only a single conformation with any constellation of nuclear bases added to the backbone or any oligomer length.

In addition to the backbone conformational purity which allows for a more efficient discovery of drug product candidates, NeuBase also has a kit of proprietary bi-facial or bi-specific nucleotides (traditional nucleotides only have a single binding face and thus are restricted to only binding single-stranded RNA targets) which can be used in any combination to access RNA secondary structures (RNA targets which are folded upon themselves) such as hairpins. This allows the company to access regions of the target transcript which may be unique in secondary structure to allow enhanced selectivity for the target (mutant) RNA vs. the normal RNA. Enhanced selectivity for mutant RNAs vs. normal RNAs is critical as normal RNAs are likely required for effective functioning of the cell. These bi-specific nucleotides can also target genomic loci.

In addition to the backbone and modified nuclear bases, the platform toolkit also includes linkers which, when added to both ends of the PNAs, allow cooperative binding at the target RNA to form longer and more tightly bound drugs.

The final component of the platform is a proprietary chemical moiety, which is used to decorate the peptide backbone and allows the PNAs to penetrate both cell membranes and move across the blood-brain barrier when administered systemically.

This relatively simple toolkit of components forms the PATrOL™ platform and allows the Company to manufacture genome and transcript-specific PNAs quickly for screening,.

The Company is currently focused on therapeutic areas in which it believes its drugs will provide the greatest benefit with a significant market opportunity and intends to utilize its technology to build out a pipeline of custom designed therapeutics for additional high-value disease targets. The Company is developing several preclinical programs using its PATrOL™ platform, including: NT0100, targeted at Huntington's Disease, a repeat expansion disorder, and NT0200, targeted at myotonic dystrophy (DM1). Preclinical studies are being conducted to evaluate the PATrOL platform technology and lead program candidates in the areas of pharmacokinetics and pharmacodynamics, with results from those studies expected by year end 2019 and into early 2020. In addition, the emerging pipeline of other assets that target secondary RNA structure and genomic DNA allows a unique market advantage across a variety of rare diseases and oncology targets.

Using its PATrOL™ platform, NeuBase can create antisense oligonucleotides ("ASO") that have distinct potential advantages over other chemical entities currently in the market or in development for gene silencing applications. These advantages include, among others: a backbone that has only one chiral center and thus forms only one stereoisomer; the ability to intercalate, open up secondary and tertiary structures and bind within RNA hairpins in a highly selective manner; a proprietary set of engineered nuclear bases which increase selectivity to specific target sequences including secondary and tertiary structures that has been licensed exclusively from Carnegie Mellon University; technology to allow self-assembly of small gamma peptide-nucleic acid ("gamma-PNA") at the RNA target to increase selectivity which has been licensed exclusively from Carnegie Mellon University; the ability to modulate cell permeability and the ability to pass the blood-brain barrier when administered systemically; the lack of innate or acquired immune responses of similar gamma-PNA's in pre-clinical models; and potential minimal toxicity based on previous in-vivo studies in rodent models. With these advantages, NeuBase's PATrOL™ platform-enabled therapies can potentially address a multitude of rare genetic diseases, among other indications.



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LEGACY OHR ASSETS AND TECHNOLOGIES

As a result of the Merger, we expect that our going-forward operations will be primarily those of Legacy NeuBase. The assets and technologies described below were the Company's assets and technologies before the consummation of the Merger. Despite the Company's expectation that its primary operations will be those of Legacy NeuBase on a going-forward basis, the Company may choose to pursue further development of the assets and technologies below in the future.

(a) SKS SUSTAINED RELEASE OCULAR DRUG DELIVERY PLATFORM TECHNOLOGY

The SKS sustained release technology was designed to develop best-in-class drug formulations for ocular disease. The technology employs micro fabrication techniques to create nano, micro and macroparticle drug formulations that can provide sustained and predictable release of a therapeutic drug over a three to six month period. The versatility of this delivery technology makes it well suited to potentially deliver hydrophilic or hydrophobic small molecules, as well as proteins with complex structures.

In , the Company suspended activities at its lab facility in San Diego, CA where research regarding the SKS sustained release technology had been conducted. However, the Company continues to explore strategies and pathways for applications of its sustained release technology and potential avenues to monetize it.




 (b) CEP ASSETS




As part of the SKS acquisition, the Company acquired the exclusive rights to an animal model for dry-AMD whereby mice are immunized with a carboxyethylpyrrole ("CEP") which is bound to mouse serum albumin ("MSA") as well as the rights to produce and use CEP for research, clinical, and commercial applications. CEP is produced following the oxidation of docosahexaenoic acid, which is abundant in the photoreceptor outer segments that are phagocytosed by the retinal pigment epithelium ("RPE"). A number of CEP-adducted proteins have been identified in proteomic studies examining the composition of drusen and other subretinal deposits found in the eyes of patients with dry- AMD. Studies have shown that immunization of CEP-MSA can lead to an ophthalmic phenotype very similar to dry-AMD, including deposition of complement in the RPE, thickening of the Bruch's membrane, upregulation of inflammatory cytokines, and immune cell influx into the eye. Upon immunization with CEP, a marked decrease in contrast sensitivity which precedes a loss of visual acuity, was observed, similar to what occurs in many patients with dry AMD. The Company has not yet monetized this technology.




 (c) DEPYMED JOINT VENTURE




Ohr also owns various other compounds in earlier stages of development, including the PTP1b inhibitor trodusquemine and related analogs. On , the Company entered into a Joint Venture Agreement and related agreements with Cold Spring Harbor Laboratory ("CSHL") pursuant to which a joint venture, DepYmed Inc. ("DepYmed"), was formed to further preclinical and clinical development of Ohr's trodusquemine and analogues as PTP1B inhibitors for oncology and rare disease indications. DepYmed licenses research from CSHL and intellectual property from us. Ohr is a passive joint venturer in DepYmed and has no ongoing obligations (monetary or otherwise) to DepYmed.

Corporate and Historical Information

We are a Delaware corporation that was organized on , as successor to BBM Holdings, Inc. (formerly Prime Resource, Inc., which was organized as a Utah corporation) pursuant to a reincorporation merger. On , we reincorporated in Delaware as Ohr Pharmaceutical, Inc. We completed the acquisition of Legacy NeuBase in and, as part of the Merger, the Company was renamed as "NeuBase Therapeutics, Inc.".



Reverse Stock Split


On , following a special meeting of the Company's stockholders, the board of directors of the Company approved a one- for-twenty reverse stock split of the Company's issued and outstanding shares of common stock (the "Reverse Stock Split"). On , the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to effect the Reverse Stock Split. The Company's common stock began trading on a split-adjusted basis when the market opened on . As a result of the Reverse Stock Split, the outstanding common stock has decreased from 56,466,428 shares of common stock, par value $0.0001 per share, to 2,829,248 shares of common stock, par value $0.0001 per share. Unless otherwise noted, impacted amounts and share information included in the financial statements and notes thereto, and elsewhere in this Form 10-Q have been retroactively adjusted for the Reverse Stock Split as if such Reverse Stock Split occurred on the first day of the first period presented. Certain amounts in the financial statements, the notes thereto, and elsewhere in this form 10-Q, may be slightly different than previously reported due to rounding of fractional shares as a result of the Reverse Stock Split.



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Liquidity and Sources of Capital

The Company has limited working capital reserves with which to fund its continuing operations. The Company is reliant, at present, upon its capital reserves for ongoing operations and has no revenues.

Net working capital reserves decreased from end of fiscal 2018 to the end of the third quarter in fiscal 2019 by $2,467,040 (to $806,396 from $3,273,436) primarily due to costs incurred from operations. Our quarterly cash burn has decreased significantly compared to prior periods in calendar 2017 and 2018 due to the discontinuation of the squalamine program. We expect our cash burn to increase in future periods in calendar 2019, due to the costs associated with the Merger and ramped up research and development and operations after the closing of the Merger. Alongside the closing of the Merger, NeuBase completed two financings raising gross proceeds of approximately $14 million, and we believe that our current cash balance will provide sufficient capital to continue operations to the end of fiscal 2020. At present, the Company has no bank line of credit or other fixed source of capital reserves. Should the Company need additional capital in the future, it will be primarily reliant upon private or public placement of its equity or debt securities, or a strategic transaction, for which there can be no warranty or assurance that the Company may be successful in such efforts.



Company Overview


As a result of the Merger, we expect that our going-forward operations will be primarily those of Legacy NeuBase. Accordingly, the results of operations reported for the three and nine months ended and 2018, in this Management's Discussion and Analysis are not indicative of the results of operations expected for the remainder of 2019 and future years due to the transition of our historic business operations to primarily those of Legacy NeuBase.




Results of Operations



Three Months Ended Compared to the Three Months Ended

Results of operations for the three months ended reflect the following changes from the three months ended .



                                               For the Three     For the Three
                                                  Months            Months
                                                Ended June        Ended June
                                                    30,               30,
                                                   2019              2018            Change
General and administrative                     $     888,538     $     834,703     $    53,835
Research and development                              82,751            52,630          30,121
Depreciation and amortization                        165,647           279,008        (113,361 )
Total Operating Expenses                           1,136,936         1,166,341         (29,405 )

Operating Loss                                    (1,136,936 )      (1,166,341 )        29,405

Other income (expense)                                    -            610,383        (610,383 )
Interest income (expense)                              3,961            10,930          (6,969 )
Net Loss                                       $  (1,132,975 )   $    (545,028 )   $  (587,947 )



For the three months ended , the Company had no revenues and had operating expenses of $1,136,936. The loss from operations was comprised of $888,538 in general and administrative expenses, $82,751 in research and development costs, and $165,647 in depreciation and amortization.



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During the three months ended , the Company reported no revenues, and had operating expenses of $1,166,341, which was comprised of $834,703 in general and administrative expenses, $52,630 in research and development costs, and $279,008 in depreciation and amortization.

The operating expenses of the Company decreased quarter-to-quarter by $29,405. General and administrative expenses increased quarter-to-quarter by $53,835. The increase is primarily a result of the Merger. Research and development expenses increased quarter-to-quarter by $30,121. The increase is primarily related to expenses related to maintaining the Company's intellectual property. Depreciation and amortization decreased by $113,361 quarter-to-quarter. The decrease was related to reduced amortization of long lived intangible assets due to a significant write down of such assets at .

The net loss for the three months ended was $1,132,975 as compared to $545,028 for the same period in 2018. Until the Company is able to generate revenues, management expects to continue to incur net losses.

Nine Months Ended Compared to the Nine Months Ended



                                               For the Nine      For the Nine
                                                  Months            Months
                                                Ended June        Ended June
                                                    30,               30,
                                                   2019              2018             Change
General and administrative                     $   2,463,964     $   2,935,919     $   (471,955 )
Research and development                             235,289         4,242,307       (4,007,018 )
Depreciation and amortization                        496,936           842,519         (345,583 )
Loss on impairment of goodwill                            -            740,912         (740,912 )
Gain on settlement of liabilities                         -         (1,228,805 )      1,228,805
Total Operating Expenses                           3,196,189         7,532,852       (4,336,663 )

Operating Loss                                    (3,196,189 )      (7,532,852 )      4,336,663

Other income (expense)                                    -            592,584         (592,584 )
Interest income (expense)                             22,542            59,115          (36,573 )
Net Loss                                       $  (3,173,647 )   $  (6,881,153 )   $  3,707,506



For the nine months ended , the Company had no revenues, and had operating expenses of $3,196,189. The loss from operations was comprised of $2,463,964 in general and administrative expenses, $235,289 in research and development costs, and $496,936 in depreciation and amortization.

During the nine months ended , the Company reported no revenues and had operating expenses of $7,532,852, which was comprised of $2,935,919 in general and administrative expenses, $4,242,307 in research and development costs, $842,519 in depreciation and amortization, $740,912 in loss on impairment of goodwill, and $1,228,805 in gain on settlement of liabilities.

The operating expenses of the Company decreased period-to-period by $4,336,663. The decrease is primarily the result of reduced operations due to the closure of the squalamine program. General and administrative expenses decreased period-to-period by $471,955. The decrease is primarily a result of a reduction in employee headcount and stock-based compensation. Research and development expenses decreased period-to-period by $4,007,018. The decrease is primarily related to completion of the MAKO study in wet-AMD in the second fiscal quarter of 2018. Depreciation and amortization decreased by $345,583 period-to-period. The decrease was related to reduced amortization of long lived intangible assets due to a significant write down of such assets at .



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The net loss for the nine months ended was $3,173,647 as compared to $6,881,153 for the same period in 2018. Until the Company is able to generate revenues, management expects to continue to incur net losses.

Off-Balance Sheet Arrangements

As of , the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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