Edesa Biotech Inc

Previous wording

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024 and March 31, 2023, and for the six months ended March 31, 2024 and 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements for the three months ended June 30, 2024 and 2023, and for the nine months ended June 30, 2024 and 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

Our approach is to acquire, develop and commercialize drug candidates based on mechanisms of action that have demonstrated proof-of-concept in human subjects. We prioritize our efforts on disease indications where there is compelling scientific rationale, no approved therapies or where there are unmet medical needs, and where there are large addressable market opportunities, among other factors. We have multiple late-stage product candidates in our development pipeline.

Current wording

Our approach is to acquire, develop and commercialize drug candidates based on mechanisms of action that have demonstrated proof-of-concept in human subjects. We prioritize our efforts on disease indications where there is compelling scientific rationale, no approved therapies or where there are unmet medical needs, and where there are large addressable market opportunities, among other factors. We have multiple late-stage product candidates in our development pipeline in the fields of respiratory diseases and medical dermatology.

Previous wording

Our most advanced drug candidate is EB05 (paridiprubart). EB05 represents a new class of emerging therapies called Host-Directed Therapeutics (HDTs) that are designed to modulate the body’s own immune response when confronted with infectious diseases or even chemical agents. Importantly, these therapies are designed to work across multiple infectious diseases and threats, and could be stockpiled preemptively ahead of outbreaks. Because they are threat agnostic, HDTs like paridiprubart have the potential to become standard of care in Intensive Care Units (ICUs) and critical countermeasures for both pandemic preparedness and biodefense. We are currently evaluating EB05 as a potential treatment for Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure. Recruitment in a Phase 3 study is ongoing.

Current wording

Our most advanced drug candidate is EB05 (paridiprubart). EB05 represents a new class of therapies called Host-Directed Therapeutics (HDTs) that are designed to modulate the body’s own immune response when confronted with infectious diseases or even chemical agents. Importantly, these therapies are designed to work across multiple infectious diseases and threats, and could be stockpiled preemptively ahead of outbreaks. Because they are threat agnostic, HDTs like paridiprubart have the potential to become standard of care in Intensive Care Units (ICUs) and critical countermeasures for both pandemic preparedness and biodefense. We are currently evaluating EB05 as a potential treatment for Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure. Recruitment in a Phase 3 study is ongoing. EB05 has also been included in a U.S. government funded platform study of HDTs.

Previous wording

Total operating expenses decreased by $0.2 million to $2.2 million for the three months ended March 31, 2024 compared to $2.4 million for the same period last year:

Current wording

Total operating expenses decreased by $0.2 million to $1.9 million for the three months ended June 30, 2024 compared to $2.1 million for the same period last year:

Previous wording

Total other income increased by $283,000 to $360,000 for the three months ended March 31, 2024 compared to $77,000 for the same period last year and was composed of the following:

Current wording

Total other income increased by $185,000 to $264,000 for the three months ended June 30, 2024 compared to $79,000 for the same period last year and was composed of the following:

Previous wording

For the three months ended March 31, 2024, our net loss was $1.9 million, or $0.58 per common share, compared to a net loss of $2.3 million, or $0.82 per common share for the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, our net loss was $1.7 million, or $0.52 per common share, compared to a net loss of $2.0 million, or $0.68 per common share for the three months ended June 30, 2023.

Previous wording

Total operating expenses decreased by $0.7 million to $4.1 million for the six months ended March 31, 2024 compared to $4.8 million for the same period last year:

Current wording

Total operating expenses decreased by $0.9 million to $6.0 million for the nine months ended June 30, 2024 compared to $6.9 million for the same period last year:

Previous wording

Total other income increased by $0.4 million to $0.5 million for the six months ended March 31, 2024 compared to $0.1 million for the same period last year and was composed of the following:

Current wording

Total other income increased by $0.6 million to $0.8 million for the nine months ended June 30, 2024 compared to $0.2 million for the same period last year and was composed of the following:

Previous wording

For the six months ended March 31, 2024, our net loss was $3.5 million, or $1.12 per common share, compared to a net loss of $4.7 million, or $1.70 per common share for the six months ended March 31, 2023.

Current wording

For the nine months ended June 30, 2024, our net loss was $5.2 million, or $1.64 per common share, compared to a net loss of $6.7 million, or $2.37 per common share for the nine months ended June 30, 2023.

Previous wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three and six months ended March 31, 2024 and 2023.

Current wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three and nine months ended June 30, 2024 and 2023.

Previous wording

Our primary use of cash is to fund our operating expenses, which consist of R&D and G&A expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was $3.1 million and $3.4 million for the six months ended March 31, 2024 and 2023, respectively. We incurred net losses of $3.5 million and $4.7 million for the six months ended March 31, 2024 and 2023.

Current wording

Our primary use of cash is to fund our operating expenses, which consist of R&D and G&A expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was $3.9 million and $5.2 million for the nine months ended June 30, 2024 and 2023, respectively. We incurred net losses of $5.2 million and $6.7 million for the nine months ended June 30, 2024 and 2023.

Previous wording

In October 2023, we entered into the 2023 SIF Agreement with the Canadian Government’s SIF. Under the 2023 SIF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding. Of the C$23 million committed by SIF, up to C$5.8 million is not repayable by us. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when we earn gross revenue. In February 2021, we entered into the 2021 SIF Agreement, pursuant to which we were eligible to receive cash reimbursements up to C$14.1 million in the aggregate for certain R&D expenses related to our EB05 clinical development program. All potential funding available under the 2021 SIF Agreement has been received. For the three and six months ended March 31, 2024 we recorded grant income of $0.3 million and $0.4 million respectively, related to the 2023 SIF Agreement. There was no grant income recognized in the comparative periods.

Current wording

In October 2023, we entered into the 2023 SIF Agreement with the Canadian Government’s SIF. Under the 2023 SIF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding. Of the C$23 million committed by SIF, up to C$5.8 million is not repayable by us. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when we earn gross revenue. In February 2021, we entered into the 2021 SIF Agreement, pursuant to which we were eligible to receive cash reimbursements up to C$14.1 million in the aggregate for certain R&D expenses related to our EB05 clinical development program. All potential funding available under the 2021 SIF Agreement has been received. For the three and nine months ended June 30, 2024 we recorded grant income of $0.2 million and $0.6 million respectively, related to the 2023 SIF Agreement. There was no grant income recognized in the comparative periods.

Previous wording

In August 2022, we filed a $150.0 million shelf registration statement. In March 2023, we entered into an equity distribution agreement with Canaccord, as sales agent, pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $20 million in gross proceeds, subject to certain offering limitations that currently allow us to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (Canaccord ATM). There was approximately $6.5 million of available capacity on the Canaccord ATM as of March 31, 2024. We have no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. For the three months ended March 31, 2024, we sold a total of 51,246 common shares pursuant to the agreement for net proceeds of $0.2 million after deducting commissions and costs of $70,000. For the six months ended March 31, 2024, we sold a total of 140,495 common shares pursuant to the agreement for net proceeds of $0.5 million after deducting commissions and costs of $100,000.

Current wording

In August 2022, we filed a $150.0 million shelf registration statement. In March 2023, we entered into an equity distribution agreement with Canaccord, as sales agent, pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $20 million in gross proceeds, subject to certain offering limitations that currently allow us to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (Canaccord ATM). There was approximately $6.3 million of available capacity on the Canaccord ATM as of June 30, 2024. We have no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. For the three months ended June 30, 2024, we sold a total of 31,421 common shares pursuant to the agreement for net proceeds of $0.1 million after deducting commissions and costs of $40,000. For the nine months ended June 30, 2024, we sold a total of 171,916 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting commissions and costs of $140,000.

Previous wording

At March 31, 2024, we had an accumulated deficit of $56.0 million and working capital of $2.1 million, including $2.8 million in cash and cash equivalents. Subsequent to the quarter, we collected the receivable from 2023 SIF Agreement for $0.7 million from Canadian government. We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand, including net proceeds from the Canaccord ATM, advances under the Credit Agreement and reimbursements of eligible R&D expenses under the 2023 SIF Agreement with the Canadian government. Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates. To help fund our operations and meet our obligations in the future, we plan to seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions. If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

Current wording

At June 30, 2024, we had an accumulated deficit of $57.6 million and working capital of $0.7 million, including $2.0 million in cash and cash equivalents. Subsequent to the quarter, we collected the receivable from 2023 SIF Agreement for $0.3 million from Canadian government. We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand, including net proceeds from the Canaccord ATM, advances under the Credit Agreement and reimbursements of eligible R&D expenses under the 2023 SIF Agreement with the Canadian government. Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates. To help fund our operations and meet our obligations in the future, we plan to seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions. If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

Previous wording

Net cash used in operating activities was $3.1 million for the six months ended March 31, 2024 compared to $3.4 million for the six months ended March 31, 2023, primarily due to a decrease in R&D expenses of $0.9 million, partially offset by a reduction in non-cash stock based compensation of $0.3 million and a reduction of $0.6 million in the recovery of working capital.

Current wording

Net cash used in operating activities was $3.9 million for the nine months ended June 30, 2024 compared to $5.2 million for the nine months ended June 30, 2023, primarily due to a decrease in R&D expenses of $1.0 million and an investment in working capital of $0.1 million, partially offset by a reduction in non-cash stock based compensation of $0.3 million.

Previous wording

There was no cash used in investing activities for the six months ended March 31, 2024 and 2023, respectively.

Current wording

There was no cash used in investing activities for the nine months ended June 30, 2024 and 2023, respectively.

Previous wording

Net cash provided by financing activities was $0.5 million for the six months ended March 31, 2024 as compared to $3.7 million for the six months ended March 31, 2023. In the current period, we received proceeds of $0.6 million from the Canaccord ATM, partially offset by issuance costs of $44,000 and the repayment of debt of $29,500. In the comparative period, we received proceeds of $3.0 million from a private placement in November 2022, offset by issuance costs of $0.1 million for net proceeds of $2.9 million. We also received $0.8 million in proceeds from the exercise of warrants.

Current wording

Net cash provided by financing activities was $0.6 million for the nine months ended June 30, 2024 as compared to $4.4 million for the nine months ended June 30, 2023. In the current period, we received proceeds of $0.7 million from the Canaccord ATM, partially offset by issuance costs of $76,000 and the repayment of debt of $29,500. In the comparative period, we received proceeds of $3.0 million from a private placement in November 2022, offset by issuance costs of $0.1 million for net proceeds of $2.9 million; we received $0.8 million in proceeds from the exercise of warrants and $0.7 million in net proceeds from the Canaccord ATM.

Previous wording

Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on R&D activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. R&D expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially. Our R&D expenses were $1.2 million and $1.9 million for the three and six months ended March 31, 2024 compared to $1.5 million and $2.8 million for the three and six months ended March 31, 2023. The decrease was due primarily to lower external research expenses related to our ongoing clinical studies.

Current wording

Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on R&D activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. R&D expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially. Our R&D expenses were $0.9 million and $2.8million for the three and nine months ended June 30, 2024 compared to $1.0 million and $3.8 million for the three and nine months ended June 30, 2023. The decrease was due primarily to lower external research expenses related to our ongoing clinical studies.