SNBP Sun BioPharma Inc

Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report and other publicly available documents, including any documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, “forward-looking statements,” including within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. When used in the following discussion, the words “anticipates,” “intends,” “believes,” “expects,” “plans,”” seeks,” “estimates,” “likely,” “may,” “would,” “will,” and similar expressions, as they relate to us or our management, are intended to identify such forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding (i) our plans to initiate a randomized clinical trial; and (ii) our estimates of additional funds that may be required to complete our development plan and obtain necessary approvals.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially and adversely from the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) our lack of diversification and the corresponding risk of an investment in our Company; (ii) potential deterioration of our financial condition and results due to failure to diversify; (iii) our ability to successfully complete acquisitions and integrate operations for new product candidates; (iv) our ability to obtain additional capital, on acceptable terms or at all, required to implement our business plan; (v) final results of our Phase I clinical trial; (vi) progress and success of our randomized Phase II/III clinical trial; (vii) our ability to demonstrate safety and effectiveness of our product candidate; (viii) our ability to obtain regulatory approvals for our product candidate in the United States, the European Union, or other international markets; (ix) the market acceptance and future sales of our product candidate; (x) the cost and delays in product development that may result from changes in regulatory oversight applicable to our product candidate; (xi) the rate of progress in establishing reimbursement arrangements with third-party payors; (xii) the effect of competing technological and market developments; (xiii) the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims; and (xiv) our ability to maintain our listing on a national securities exchange (xv) such other factors as discussed in Part I, Item 1A under the caption “Risk Factors” in our most recent Annual Report on Form 10-K, any additional risks presented in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

Any forward-looking statement made by us in this Quarterly Report is based on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement or reasons why actual results would differ from those anticipated in any such forward-looking statement, whether written or oral, whether as a result of new information, future developments or otherwise.

Overview

Panbela Therapeutics, Inc. (“Panbela” and together with its direct and indirect subsidiaries, “we,” “us,” “our,” and the “Company”) is a clinical stage biopharmaceutical company developing disruptive therapeutics for the treatment of patients with urgent unmet medical needs.

On June 15, 2022, Panbela completed the previously announced strategic business reorganization and acquisition of Cancer Prevention Pharmaceuticals, Inc. (“CPP”) pursuant to the agreement and plan of merger, dated as of February 21, 2022 (the “Merger Agreement”), by and among Panbela, CPP and Panbela Research, Inc. (formerly known as Panbela Therapeutics, Inc., “Panbela Research”), among others. Pursuant to the terms of the Merger Agreement, (i) Canary Merger Subsidiary I, Inc. (“Merger Sub I”), then a wholly-owned subsidiary of Panbela, which was itself a wholly-owned subsidiary of Panbela Research, merged with and into Panbela Research (the “First Merger”), with Panbela Research surviving the First Merger, and (ii) Canary Merger Subsidiary II, Inc., then a wholly-owned subsidiary of Panbela, merged with and into CPP (the “Second Merger” and, together with the First Merger, the “Mergers”), with CPP surviving the Second Merger. As a result of the Mergers, each of Panbela Research and CPP became a wholly owned subsidiary of Panbela. In addition, in connection with the consummation of the Mergers, “Panbela Therapeutics, Inc.” was renamed “Panbela Research, Inc.” and “Canary Merger Holdings, Inc.” was renamed “Panbela Therapeutics, Inc.”

Our lead candidates are ivospemin (SBP-101) for which we have exclusively licensed the worldwide rights from the University of Florida Research Foundation, Inc. and Flynpovi (eflornithine (CPP-1X) and Sulindac). Flynpovi is delivered in an oral form. The Company has an exclusive worldwide license to commercialize Flynpovi from the Arizona Board of Regents of the University of Arizona.

Ivospemin (SBP-101)

In 2015, the FDA accepted our Investigational New Drug (“IND”) application for our ivospemin product candidate. In May of 2022 we were notified that the United States Adopted Names (“USAN”) had adopted ivospemin as a USAN for SBP-101. The USAN information on ivospemin was posted on the USAN Web site (www.ama-assn.org/go/usan).

We have completed an initial clinical trial of ivospemin in patients with previously treated locally advanced or metastatic pancreatic cancer. This was a Phase I, first-in-human, dose-escalation, safety study. From January 2016 through September 2017, we enrolled twenty-nine patients into six cohorts, or groups, in the dose-escalation phase of the Phase I trial. No drug-related bone marrow toxicity or peripheral neuropathy was observed at any dose level. In addition to being evaluated for safety, 23 of the 29 patients were evaluable for preliminary signals of efficacy prior to or at the eight-week conclusion of their first cycle of treatment using the Response Evaluation Criteria in Solid Tumors (“RECIST”), the currently accepted standard for evaluating change in the size of tumors.

In 2018, we began enrolling patients in our second clinical trial, a Phase Ia/Ib study of the safety, efficacy and pharmacokinetics of ivospemin administered in combination with two standard-of-care chemotherapy agents, gemcitabine and nab-paclitaxel. A total of 25 subjects were enrolled in four cohorts to evaluate the dosage level and schedule. An additional 25 subjects were enrolled in the expansion phase of the trial. Interim results were presented in January of 2022. Best response in evaluable subjects (cohorts 4 and Ib N=29) was a CR in 1 (3%), PR in 13 (45%), SD in 10 (34%) and PD in 5 (17%). One subject did not have post baseline scans with RECIST tumor assessments. Median PFS, now final at 6.5 months, may have been negatively impacted by drug dosing interruptions to evaluate potential toxicity. Median overall survival in Cohort 4 + Phase Ib was 12.0 months when data was presented in January 2022 and is now final at 14.6 months. Two patients from cohort 2 have demonstrated long term survival. One at 30.3 months (final data) and one at 33.0 months and still alive at data base lock on March 18, 2022. Seven subjects are still alive at database lock, one from cohort 2 and six from cohort 4 plus Ib.

In January of 2022, the Company announced the initiation of a new clinical trial. Referred to as ASPIRE, the trial is a randomized double-blind placebo-controlled trial in combination with gemcitabine and nab-paclitaxel, a standard pancreatic cancer treatment regimen in patients previously untreated for metastatic pancreatic cancer. The trial will be conducted globally at approximately 95 sites in the United States, Europe and Asia - Pacific. The company announced the first patient enrolled in the trial in Australia in August of 2022. In September, the company announced that they had obtained regulatory approval to open sites in Spain, France and Italy. On March 31, 2023 there were 45 sites open in 7 countries.

While opening of clinical sites in the United States and the rest of the world has been slower than originally anticipated, due in part to resource fatigue in the medical community, the Company expects all countries and sites to be open by mid-2023.

The trial was originally designed as a Phase II/III with a smaller initial sample size (150) to support the events required for interim analysis based on progression-free survival (PFS) and a primary endpoint of overall survival. In response to European and FDA regulatory feedback, the study was amended to include the total trial sample size (600) and the design modified to utilize overall survival as the primary endpoint to be examined at interim analysis. PFS will also be analyzed to provide additional efficacy evidence. This amendment was supported by the final data from the Phase Ia/Ib first line metastatic pancreatic trial which completed enrollment in December of 2020. The study will enroll 600 subjects and is anticipated to take 36 months for complete enrollment with the interim analysis available in early 2024.

In early April 2023, the Company announced a poster presentation highlighting the results for ivospemin as a polyamine metabolism modulator in ovarian cancer at the American Association for Cancer Research Annual Conference The poster concludes that the ivospemin chemotherapy treatment of C57Bl/6 mice injected with VDID8+ ovarian cancer cells significantly prolonged survival and decreased overall tumor burden. The results suggest that ivospemin in combination with standard of care chemotherapy may have a role in the clinical management of ovarian cancer, and the Company intends to continue pre-clinical and clinical studies in ovarian cancer.

Additional clinical trials may be required for FDA or other country approvals. The cost and timing of additional clinical trials are highly dependent on the nature and size of the trials.

Flynpovi (eflornithine (CPP-1X) and sulindac)

In 2009, the FDA accepted our IND application for the combination product, Flynpovi, product candidate.

In a Phase III study, the efficacy and safety of the combination of eflornithine and sulindac known as Flynpovi, as compared with either drug eflornithine or sulindac alone, in adults with familial adenomatous polyposis (“FAP”) was conducted. A total of 171 patients underwent randomization. Disease progression occurred in 18 of 56 patients (32%) in the Flynpovi group, 22 of 58 (38%) in the sulindac group, and 23 of 57 (40%) in the eflornithine group, with a hazard ratio of 0.71 (95% confidence interval [CI], 0.39 to 1.32) for Flynpovi as compared with sulindac (p = 0.29) and 0.66 (95% CI, 0.36 to 1.23) for Flynpovi as compared with eflornithine. In a post-hoc analysis, none of the patients in the Flynpovi arm progressed to a need for lower gastrointestinal (“LGI”) surgery for up to 48 months compared with 7 (13.2%) and 8 (15.7%) patients in the sulindac and eflornithine (CPP-1X) arms. These data corresponded to risk reductions for the need for LGI surgery approaching 100% between Flynpovi and either monotherapy with HR = 0.00 (95% CI, 0.00–0.48; p = 0.005) for Flynpovi versus sulindac and HR = 0.00 (95% CI, 0.00–0.44; p = 0.003) for Flynpovi versus eflornithine. Given the statistical significance of the LGI group, a new drug application (“NDA”) was filed with the FDA. As the study failed to meet the primary endpoint, and the NDA was based on the results of an exploratory analysis, a complete response letter was issued. To address this deficiency concern, the Company must submit the results of one or more adequate and well-controlled clinical trials which demonstrate an effect on a clinical endpoint.

In April of 2023 the Company regained the North American rights to develop and commercialize Flynpovi in patients with FAP, as a result of the termination of the licensing agreement between CPP and One-Two Therapeutics Assets Limited

We also have an ongoing double-blind placebo-controlled trial of Flynpovi to prevent recurrence of high-risk adenomas and second primary colorectal cancers in patients with stage 0-III colon or rectal cancer, Phase III - Preventing Adenomas of the Colon with Eflornithine and Sulindac (“PACES”). The purpose of this study is to assess whether the combination of eflornithine and sulindac (compared to corresponding placebos) has efficacy against colorectal lesions with respect to high-grade dysplasia, adenomas with villous features, adenomas one cm or greater, multiple adenomas, any adenomas >/= 0.3 cm, total advanced colorectal events, or total colorectal events. The PACES trial is funded by the National Cancer Institute (“NCI”) in collaboration with Southwest Oncology Group (“SWOG”).

Eflornithine (CPP-1X)/eflornithine sachets (CPP-1X-S)

In 2009 and 2018, the FDA accepted our IND applications for eflornithine.

There are trials evaluating eflornithine sachets in relapsed refractory neuroblastoma supported by the Children’s Oncology Group (“COG”) /NCI (ongoing) and STK11 mutation patients with non-small cell lung cancer scheduled to begin this year. For eflornithine tablets, a Phase II trial in early onset Type I diabetes was opened on January 11, 2023 in collaboration with Indiana University and the Juvenile Diabetes Research Foundation (“JDRF”).

Financial Overview

On January 13, 2023, the Company's Board of Directors approved the implementation of a reverse stock split at a ratio of one-for-forty (1:40) shares of the Company's common stock. The reverse stock split was effective as of January 13, 2023. All share and per share amounts of our common stock presented have been retroactively adjusted to reflect the one-for-forty reverse stock split.

We have incurred losses of $96.2 million since 2011. For the three months ended March 31, 2023, we incurred a net loss of $5.1 million. We also incurred negative cash flows from operating activities of approximately $9.7 million for this period. We expect to continue to incur substantial losses, which will generate negative net cash flows from operating activities, as we continue to pursue research and development activities and commercialize.

Our cash was approximately $5.2 million and $1.3 million as of March 31, 2023 and December 31, 2022, respectively. An increase of $3.9 million in cash for the three months ended March 31, 2023 was due to $13.7 million net financing activities offset in part by approximately $9.7 million negative cash flow from operations. Due to drug shortages of Abraxane, which is utilized in addition to ivospemin for the current randomized clinical trial, the Company has explored all avenues to procure supply and prepayments of approximately $2.0 million were required well in advance of delivery and is reflected in the periods cash used in operations. Net financing activities included a registered public offering of common stock, prefunded warrants, and warrants with net proceeds of approximately $13.7 million. The Company also sold common stock through its at-the market sales arrangement, with net proceeds of approximately $1.6 million. In the same period, the Company also recorded $1.6 million in loan repayments.

We need to raise additional capital to continue our operations and execute our business plan past the second quarter of 2023, including completing required future trials and pursuing regulatory approvals in the United States, the European Union, and other international markets. Historically we have financed our operations principally from the sale of equity securities and debt. While we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means, there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions, or at all. This risk would increase if our clinical data were not positive or if economic or market conditions deteriorate.

If we are unable to obtain additional financing when needed, we would need to scale back our operations, taking actions which may include, among other things, reducing use of outside professional service providers, reducing staff or staff compensation, significantly modifying, or delaying the development of our product candidates, licensing to third parties the rights to commercialize our product candidates, or ceasing operations.

The Company has not experienced any significant disruptions to our operations as a result of the COVID-19 pandemic. Recruitment and enrollment in our Phase Ia/Ib trial was paused for a brief time in April and May of 2020. The drug product was delayed during early 2022, but we had adequate supply to initiate our randomized Phase II/III clinical trial and experienced no product related disruptions to our clinical trials. The Company was not required to change management practices as it was decentralized prior to the COVID-19 pandemic.

Research and development (“R&D”) and general and administrative (“G&A”) expenses include non-cash share-based compensation expense resulting from our issuance of stock options. We expense the fair value of equity awards over their vesting periods. The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. The awards granted through March 31, 2023 vest upon performance or time-based conditions. We expect to record additional non-cash share-based compensation expense in the future, which may be significant.

The following table summarizes the stock-based compensation expense in our statements of comprehensive loss:

General and administrative expense

Our G&A expenses decreased 24.7% to $1.4 million in the first quarter of 2023, down from $1.8 million in the first quarter of 2022. The decrease is primarily related to reduced legal and other costs associated with the completed merger of CPP in 2022.

Research and development expense

Our R&D expenses increased 58.9% to $3.5 million in the first quarter of 2023, up from $2.2 million in the first quarter of 2022. The increase is due primarily to increased sites and subject enrollments in the ASPIRE Randomized Phase II/III trial in the first quarter of 2023.

Other income (expense), net

Other expense, net, was approximately $0.3 million for the three months ended March 31, 2023. Other expenses in the three months ended March 31, 2023 are related to foreign currency exchange loss on the intercompany receivable balance and interest expense on two promissory notes.

Other income, net, was approximately $0.3 million for the three months ended March 31, 2022. Other income in the three months ended March 31, 2022 is related to foreign currency exchange gain on the intercompany receivable balance.

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of March 31, 2023 and December 31, 2022 and our cash flow data for the three months ended March 31, 2023 and 2022. It is intended to supplement the more detailed discussion that follows (in thousands):

Working Capital

Our total cash and cash equivalents were $5.2 million and $1.3 million as of March 31, 2023 and December 31, 2022, respectively. We had $9.7 million in current liabilities and a working capital deficit of $1.9 million as of March 31, 2023, compared to $7.8 million in current liabilities and working capital deficit of $6.0 million as of December 31, 2022. Working capital is defined as current assets less current liabilities.

Cash Flows

Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $9.7 million in the three months ended March 31, 2023 compared to approximately $4.5 million in the three months ended March 31, 2022. The net cash used in each of these periods primarily reflects the net loss for these periods and is partially offset by the effects of changes in operating assets and liabilities. For the quarter ended March 31, 2023, cash used in operating activities also included $5.5 million to fund long term deposits held by the CRO leading our randomized trial. The increase in the quarter to Net Deposits held by our CRO was offset by an increase in Accounts Payable. Also reflected in the increased cash used in operations is approximately $2.0 for prepayment of drug supply.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $13.7 million for the three months ended March 31, 2023, with no cash provided by financing activities for the three months ended March 31, 2022. The cash provided for the three months ended March 31, 2023 represents the proceeds from the sale of common stock, prefunded warrants and warrants, partially offset by the payment and payoff of promissory notes.

Capital Requirements

As we continue to pursue our operations and execute our business plan, including the completion of the clinical development plan for our initial product candidate, ivospemin, in pancreatic cancer, and pursuing regulatory approvals in the United States, the European Union and other international markets, we expect to continue to incur substantial and increasing losses, which will continue to generate negative net cash flows from operating activities.

Our future capital uses and requirements depend on numerous current and future factors. These factors include, but are not limited to, the following:

As of March 31, 2023, we did not have any existing credit facilities under which we could borrow funds. Historically we have financed our operations principally from the sale of equity securities and debt. While we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means, there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions, or at all.

Indebtedness

CPP issued to Sucampo GmbH (“Lender”) an Amended and Restated Promissory Note (the “Note”) on June 15, 2022 for the principal sum of approximately $6.2 million (the “Principal”). The note bears simple interest on any outstanding Principal at a rate of 5% per annum. All unpaid Principal, together with any then unpaid and accrued interest, is payable as follows: (i) $1.0 million, plus all interest accrued but unpaid on or before each of January 31, 2023, January 31, 2024, January 31, 2025 and January 31, 2026; and (ii) all remaining Principal plus accrued but unpaid interest on or before January 31, 2027. The Company made the scheduled January 31, 2023 payment of $1.0 million plus accrued interest. The outstanding principal balance on March 31, 2023 was approximately $5.2 million. Accrued and unpaid interest as of March 31, 2023 totaled approximately $42,000.

Panbela has provided a Guarantee of payment in favor of the Lender for the full amount of the Note issued to the Lender.

As of March 31, 2023, the outstanding balance on the amended promissory note with a former development partner, Tillotts Pharma AG was paid in full.

Critical Accounting Policies and Estimates

Our significant accounting policies and estimates are set forth in the notes accompanying the condensed consolidated financial statements included in this document. The accounting policies and estimates used in preparing our interim fiscal 2023 condensed consolidated financial statements are the same as those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.