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ANTRIABIO, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

May 14, 2014

Effective May 1, 2014, the Company effected a 6 to1 reverse stock split of the Company's common stock, in which for every six (6) shares of common stock combined into one (1) share of common stock. All share and per share amounts in this Quarterly Report on Form 10-Q have been retroactively restated to reflect the forward split.

General



This discussion and analysis should be read in conjunction with the accompanying financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.

Overview, Background and Recent Developments

On January 31, 2013, AntriaBio acquired Antria Delaware pursuant to a share exchange in which AntriaBio acquired all of the issued and outstanding shares of common stock of Antria Delaware from the stockholders of Antria Delaware in exchange for 5,880,667 shares of common stock of AntriaBio (the "Reverse Merger"). As a result of the Reverse Merger, Antria Delaware became a wholly owned subsidiary of AntriaBio. For accounting purposes, the Reverse Merger was treated as a reverse acquisition with Antria Delaware as the acquirer and AntriaBio as the acquired party. As a result, the business and financial information included in the report is the business and financial information of Antria Delaware. The accumulated deficit of AntriaBio has been included in additional paid-in-capital. Pro-forma information has not been presented as the financial information of AntriaBio was insignificant.

Antria Delaware was formed as a Delaware corporation in March 2010 under the name "AntriaBio, Inc." As a condition precedent to the Reverse Merger, Antria Delaware agreed to change its name from "AntriaBio, Inc." to "AntriaBio Delaware, Inc." On January 3, 2013, Antria Delaware filed an amendment to its certificate of incorporation with an effective date of January 10, 2013 to change its name from "AntriaBio, Inc." to "AntriaBio Delaware, Inc."

Antria Delaware was formed with the express purpose of acquiring the assets of PR Pharmaceuticals, Inc. ("PRP"). PRP was a company that developed proprietary technology to be used with active pharmaceutical ingredients to create sustained release injectable formulations. On October 5, 2012, Antria Delaware entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") to acquire all of PRP's operating and intellectual property assets out of bankruptcy including, but not limited to, program data and materials, associated inventory, equipment, lab notebooks, patents, patent applications, technology and know-how, electronic data, and regulatory filings/correspondence related to development programs (the "Asset Purchase"). On January 31, 2013, the Asset Purchase closed and upon closing, PRP's lead product candidate, a potential once-a-week basal insulin injection for the diabetes market, became our lead product candidate (AB101). Our strategy is to develop AB101 and other products for the diabetes market using our proprietary sustained release formulation capabilities with known pharmaceutical agents and United States Food and Drug Administration ("FDA") approved delivery technologies. We believe that this strategy increases the probability of technical success while reducing safety concerns, approval risks and development costs. We also believe that our approach can result in differentiated, patent-protected products that provide significant benefits to patients and physicians.

18 Plan of Operation



We have been focused on raising capital to fund our initial operations including conducting clinical studies for AB101 and developing our product pipeline. Our objective is to demonstrate that AB101 is safe and effective at the intended once weekly subcutaneous dosing frequency, specifically that it is non-inferior to current standard of care basal insulin therapies such as Lantus in controlling blood glucose, without an undue risk of hypoglycemia. After completion of additional IND-enabling work, we plan on filing an IND with the FDA in 2015, followed by the initiation of clinical trials in the second half of 2015. The objectives of the Phase 1 program will be to assess the single and repeat (once weekly) ascending dose safety, pharmacokinetics (PK), and pharmacodynamics (PD) in the target population with type 1 and type 2 diabetes, including confirmation of the time-action profile for glucose lowering (Phase 2a data). Following successful completion of the Phase 1/2a program, Phase 2b trials in both populations will be conducted to obtain proof-of-concept for the intended once weekly dosing regimen, using the accepted biomarker for glucose efficacy (hemoglobin A1c; HbA1c), compared to a standard of care basal insulin such as Lantus. If proof-of-concept trials are successful, we would expand our clinical program to include Phase 3 registration trials in various jurisdictions including the US and Europe, to obtain regulatory and marketing approval. The Phase 3 program would include studies in combination with other injectable and oral glucose lowering therapies, and would be designed to meet regulatory guidelines for the development of therapies for diabetes, while achieving an expanded label at the time of product launch.

This year, as a precursor to our US clinical studies and in order to fulfil FDA requirements for GLP (good laboratory practices) toxicity studies in support of our IND, we plan on conducting necessary IND-enabling pre-clinical studies, including acute and sub-acute toxicity studies in rodents and non-rodents, safety pharmacology, and mutagenicity/genotoxicity studies. Additional work may include further in vitro and in vivo pharmacology. In parallel, we will also conduct CMC work to produce clinical trial material under clinical good manufacturing practices (cGMP) conditions, as well as develop the necessary analytical methods for testing the material. Near term or critical path pre-clinical work will be geared toward enabling the IND and first clinical trial(s), while subsequent non critical path pre-clinical development work will be staged and resourced to meet the needs of continued clinical development.

Part of the assets that we acquired from PR Pharmaceuticals includes bulk product that has been fully characterized for strength, particle size, and sufficiency for injection and stability, but has not been produced in conformance with the FDA cGMP requirements and is therefore not approved for clinical use in the US (the "Existing Material"). Therefore, this Existing Material will be used to facilitate timely conduct of critical path IND-enabling studies. This material could also be used to conduct a preliminary clinical trial outside of the U.S., and this possibility is being evaluated.

In order to provide sterile, cGMP clinical material for our pre-clinical testing and clinical studies in the US, we plan on leasing a facility in the greater Denver, Colorado area where we anticipate making certain leasehold improvements including the addition of a cGMP aseptic suite. In the facility we plan on installing, commissioning and validating the manufacturing and analytical equipment that we acquired from PR Pharmaceuticals, which was previously used to produce AB101. We expect new material for the IND enabling preclinical and stability studies to be available by the end of the calendar year Q3 2014 and we anticipate having new clinical material for our US trials by the end of Q1 2015.

We entered into a lease for office, lab and clean room space in Louisville, Colorado. In order to facilitate commissioning of equipment and manufacturing in the leased facility, we entered into an agreement with a company located in Colorado to utilize their services to carry out simulated runs for manufacturing, to ensure that the analytical equipment is operational, and to produce documentation for analytical methods needed for product release and stability testing. The manufacturing and analytical equipment are assets that the Company acquired from PR Pharmaceuticals.

While we have preclinical and clinical plans for AB101 as well as plans to develop other product opportunities, we currently do not have sufficient cash to carry out these studies and other Company objectives. We believe that we need to raise as much as $30 million to fund our development and clinical activities through the completion of the initial Phase 1 and Phase 2 AB101 studies in the US. We raised approximately $11.6 million through early 2014 and will potentially raise an additional $10 to 15 million in late 2014 or the first half of 2015. We also anticipate that during this same period, we will hire 30-45 individuals and spend approximately ten million dollars on salaries/benefits, rent and general and administrative matters.

19



Significant Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our financial position or results of operations.

Results of Operations



For Three and Nine Months Ended March 31, 2014 and 2013

Results of operations for the three months ended March 31, 2014 (the "2014 quarter") and the three months ended March 31, 2013 (the "2013 quarter") reflected losses of $5,087,130 and $4,533,977, respectively. These losses include charges related to stock based compensation of $164,484 in the 2014 quarter and $3,269,894 in the 2013 quarter. The losses also include the amortization of the debt discount into interest expense of $2,938,364 in the 2014 quarter and $2,280 in the 2013 quarter as well as a write off of receivable balances of $341,780 in the 2014 quarter.

Results of operations for the nine months ended March 31, 2014 (the "2014 period") and the nine months ended March 31, 2013 (the "2013 period") reflected losses of $7,725,223 and $5,697,839 respectively. These losses include charges related to stock based compensation of $495,120 in the 2014 period and $3,269,893 in the 2013 period as well as a derivative expense of $559,791 in the 2014 period and $311,794 in the 2013 period. The losses also include the amortization of the debt discount into interest expense of $3,356,000 in the 2014 period and $19,312 in the 2013 period as well as a write off or receivable balances of $341,780 in the 2014 period.

Revenues



We are a development stage entity and have not generated any revenues since inception.

Expenses



Consulting expenses were approximately $221,000 in the 2014 quarter compared to $266,000 in the 2013 quarter, and $383,000 in the 2014 period compared to $494,000 in the 2013 period. The decrease is primarily due to the decrease in consulting fees that were paid to Konus Advisory Group for director consulting fees and other consulting services.

Payroll expenses were approximately $591,000 in the 2014 quarter compared to $3,473,000 in the 2013 quarter, and $1,361,000 in the 2014 period and $3,867,000 in the 2013 period. The decrease is due to stock-based compensation in the 2013 period for stock options that were granted in January 2013 and had immediately vested.

Professional fees were approximately $228,000 in the 2014 quarter compared to $198,000 in the 2013 quarter, and $471,000 in the 2014 period compared to $487,000 in the 2013 period. Professional fees consist primarily of legal, audit and accounting costs, costs related to public company compliance, and consulting related to capital formation. The increase is due to the increase in legal services as well as other public compliance costs that have been incurred in the 2014 period.

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General and administrative costs were approximately $451,000 in the 2014 quarter compared to $30,000 in the 2013 quarter, and $490,000 in the 2014 period compared to $60,000 in the 2013 period. The increase in the 2014 period is primarily due to the write off of receivable balances in the 2014 quarter as well as increased marketing and investor relations costs in the current period.

Liquidity and Capital Resources

At March 31, 2014, we have approximately $5.6 million of cash on hand. In March and April 2014, the Company completed a private placement transaction in which the Company issued units to accredited investors. Each unit consists of one share of our common stock and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common stock at a price of $2.34 per share and the warrant will expire 36 months following the issuance. The Company received net proceeds of $7.6 million after the placement agent compensation. The private placement above was considered a "qualified financing" which allowed conversion of a significant amount of our convertible bridge note holders to convert into equity. As such the $2,703,000 in 2013 Notes and the accrued interest was converted into 2,186,847 shares of our common stock. The Company also converted $3,007,500 of the 2010, 2011 and 2012 Notes and accrued interest into 2,401,610 shares of our common stock. Since March 31, 2014, the remaining note holders have agreed to convert all but $211,966 of the remaining principal and interest into common stock.

The capital that was received in the private placement will be used to fund our ongoing operations including hiring additional personnel, leasing a manufacturing facility, acquiring certain equipment and commencing clinical trials.

Going Concern



The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations in our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain additional financing through either private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. These conditions raise substantial doubt about our ability to continue as a going concern.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have an effect on the Company's consolidated financial statements.

Off-Balance Sheet Arrangements

We had no off-balance sheet transactions.


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Source: Edgar Glimpses


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