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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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The following is a discussion of the financial
condition of the Company as of November 30, 2020, and the results of operations comparing the three and nine months ended November
30, 2020 and 2019. It should be read in conjunction with the financial statements and the notes thereto included elsewhere in this
report and in conjunction with the Annual Report on Form 10-K for the year ended February 29, 2020.
Forward-Looking Statements
Certain matters discussed in this quarterly
report, except for historical information contained herein, may constitute “forward-looking statements” that are subject
to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking
statements. Forward-looking statements provide current expectations of future events based on certain assumptions. These statements
encompass information that does not directly relate to any historical or current fact and often may be identified with words such
as “anticipates,” “believes,” “expects,” “estimates,” “intends,” “plans,”
“projects” and other similar expressions. Management’s expectations and assumptions regarding Company operations
and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially
from the anticipated results or other expectations expressed in the forward-looking statements.
Introduction
The Company is primarily engaged as a research
and development facility of drugs currently being tested for the use in the treatment of cancer, and provides consulting services.
The Company’s clinical trial initiated in April 2016 for children and adults with Diffuse Intrinsic Pontine Glioma (DIPG)
(protocol “BT-55”) is currently under full clinical hold.
On September 3, 2004, the FDA granted
the Company’s request for “orphan drug designation” (“ODD”) for the Company’s Antineoplastons
(A10 & AS2-1 Antineoplaston) for treatment of patients with brain stem glioma and, on October 30, 2008, the FDA granted
the Company’s request for ODD for Antineoplastons (A10 and AS2-1 Antineoplaston) for the treatment of gliomas.
On January 13, 2009, the Company announced
that the Company had reached an agreement with the FDA for the Company to move forward with a pivotal Phase III clinical trial
of combination Antineoplaston therapy plus radiation therapy in patients with newly diagnosed diffuse, intrinsic brainstem gliomas
(“DBSG”). The agreement was made under the FDA’s Special Protocol Assessment procedure, meaning that the design
and planned analysis of the Phase III study of combination Antineoplastons A10 and AS2-1 plus radiation therapy (“RT”)
in patients with newly-diagnosed, diffuse, intrinsic brainstem glioma (protocol “BT-52”), are acceptable to support
a regulatory submission seeking new drug approval. However, the FDA placed a full clinical hold on IND 43,742 regarding such Phase
III clinical trial. Please see the section below entitled “Clinical Hold on Phase II and Phase III Clinical Trials.”
Clinical Hold on Phase II and Phase III Clinical Trials
In a letter dated June 25, 2012, the
Company informed the FDA of a serious adverse event in which a patient who was receiving Antineoplastons developed grade 4 hypernatremia
and subsequently died. The Antineoplaston-related hypernatremia was categorized by the investigator as possibly related to the
study drug. Of the 2,297 patients who have received at least one dose of Antineoplastons, the serious adverse events (SAEs)
which have been experienced are as follows: hemoglobin (grade 3: 0.13%; grade 4: 0.04%), extravasation (grade 3: 0.04%),
pain (grade 3: 0.04%), fatigue (grade 3: 0.09%; grade 4: 0.04%), fever (grade 3: 0.09%), injection site reaction (grade 3: 0.04%),
vomiting (grade 3: 0.09%), hypernatremia (grade 3: 0.09%; grade 4: 1.12%; grade 5: 0.26%), confusion (grade 3: 0.04%), seizure
(grade 3: 0.04%), somnolence (grade 3: 0.35%; grade 4: 0.04%), pain: head/headache (grade 3: 0.09%) and pain: joint (grade 3: 0.04%).
On July 30, 2012, the FDA placed a
partial clinical hold for enrollment of new pediatric patients under single patient protocols or in any of the active Phase II
or Phase III studies under investigational new drug application 43,742. The FDA imposed this partial clinical hold because,
according to the FDA, insufficient information had been submitted by the Company to allow the FDA to determine whether the potential
patient benefit justifies the potential risks of treatment use, and that the potential risks are not unreasonable in the context
of the disease or condition to be treated. The FDA cited 21 C.F.R. § 312.42(b)(2)(i), 21 C.F.R. § 312.42(b)(1)(iv),
and 21 C.F.R. § 312.42(b)(3)(i), as grounds for imposition of a clinical hold; and 21 C.F.R. § 312.305(a)(2), a criteria
for expanded access use. The FDA advised the Company that until it resolved the matter to the FDA’s satisfaction, the
Company could not enroll new pediatric patients in any protocol under such IND. The Company later notified the FDA in a September 24,
2012 letter that it was closing pediatric protocol BT-10 (under IND 43,742) for enrollment effective September 25, 2012, and
that it would also terminate the protocol once all active patients had completed the study. As of February 17, 2015, all patients
discontinued treatment under protocol BT-10 and such protocol was closed as of March 10, 2015.
In a teleconference on January 9, 2013
between the FDA and the Company, followed by a letter of the same date, the FDA notified the Company that the agency was placing
IND 43,742 on partial clinical hold, due to a lack of a complete response to the issues raised by the FDA and what the FDA deemed
a misleading, erroneous, and incomplete investigator brochure. The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21
C.F.R. § 312.42(b)(1)(iii), as grounds for imposition of a clinical hold. The FDA further advised the Company that until
it resolved the matter to the FDA’s satisfaction, that the Company could not enroll new adult or pediatric patients in any
protocol under such IND. The FDA also placed protocol BT-52 on clinical hold due to what the FDA deemed to be an unreasonable
and significant risk of illness or injury to human subjects. The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21 C.F.R.§
312.42(B)(1)(i), as grounds for imposition of a clinical hold. The FDA advised the Company that until it resolved the matter
to the FDA’s satisfaction, the Company could not legally conduct the identified clinical study under such IND. In a
teleconference with the FDA on September 16, 2013 and pursuant to the Company’s notification letter dated September 17,
2013, the Company notified the FDA that the proposed Phase III protocol BT-54 had been withdrawn from further consideration.
After several amendments to the IND which
were reviewed by the FDA, the FDA concluded that BT-52 can be initiated and the partial clinical hold was removed by the FDA on
June 20, 2014.
Additionally, the Company received IRB approval
on February 4, 2015 for FDA reviewed protocol BT-55 open label, Phase II study of Antineoplaston A10 and AS2-1 in patients
with a Diffuse Intrinsic Brainstem Glioma (DIPG) in five treatment groups based on patients age and prior treatment.
On April 20, 2016, the Company received
a full clinical hold letter from the FDA based on FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
On April 27, 2016, the Company requested to change the full clinical hold to partial clinical hold to allow patient #1 to
continue the Antineoplaston treatment according to protocol BT-55, since the patient was enrolled before the full clinical hold
was imposed. Based on the FDA’s position regarding the Company’s request on April 27, 2016 and the Company’s
teleconference with the FDA on May 3, 2016, the Company removed patient #1 from the study.
A temporary restraining order from the US
District Court of Rhode Island allowed the resumption of patient #1’s Antineoplaston therapy on May 17, 2016.
As a result of such temporary restraining order, a subsequent letter from the FDA dated May 26, 2016 informed the Company
that the full clinical hold was replaced and a partial clinical hold was imposed. As a result, patient #1 restarted treatment
under IND 43742.
On June 14, 2016, the FDA issued a
letter to the Company in connection with the FDA’s inspection of S.R. Burzynski’s manufacturing facility (the “SRB
Manufacturing”) in March 2015. The SRB Manufacturing addressed the issues raised in the letter in a response letter
submitted to the FDA on July 5, 2016 and in subsequent letters.
On February 20, 2017, BRI informed
the FDA of the death of patient #1 on February 19, 2017. No new patients can be enrolled to protocol BT-55 or BT-52 until
the partial hold on IND 43742 is lifted. On August 24, 2017, the FDA imposed a full clinical hold on IND 43742 until deficiencies
regarding the SRB Manufacturing are resolved.
Complaint Filed by the Texas Medical Board Against Dr. Burzynski
On March 3, 2017, the Texas Medical
Board issued their final ruling regarding the complaint filed on December 11, 2013 and subsequently amended in July 2014
and November 2014, against Dr. Stanislaw R. Burzynski, who serves as our President and the Chairman of our Board of Directors.
The Texas Medical Board made allegations that Dr. Burzynski had acted unprofessionally and failed to meet standards of care
under the state’s Medical Practice Act. In the final ruling, the Texas Medical Board found that Dr. Burzynski was subject
to sanction for various failures that included supervision of foreign medical graduates, untimely and insufficient informed consent,
medical record support documentation, tumor measurement reporting inaccuracy, and lack of disclosure of ownership interest in a
pharmacy. As a result, Dr. Burzynski was reprimanded. His Texas license was suspended for five years but that
suspension was stayed and he was placed under probation under terms and conditions that include having billing practice monitored
by a billing monitor for 12 consecutive monitoring cycles, enrolling and completing a physicians education program ethics course,
following informed consent protocol, passing the Medical Jurisprudence Examination, and compliance with the Medical Practice Act
and other statutes regulating Dr. Burzynski’s practice. As requested as part of the terms and conditions, Dr. Burzynski
has completed payment of an administrative penalty and restitution, submission of all informed consent forms for review, submission
of an ownership interest disclosure form for review, and he has completed continuing medical education. The Company does
not believe that the final order will have an adverse impact on current activities at the Burzynski clinic. However,
if any outcomes or changes arise relating to similar matters or future allegations, this could result in substantial harm to the
Company’s business and operations.
Termination of License Agreement
Pursuant to the terms of the License Agreement
dated June 29, 1983, as superseded by an Amended License Agreement dated April 24, 1989 and a Second Amended License
Agreement dated March 1, 1990 between the Company and Dr. Burzynski (collectively, the “License Agreement”),
the License Agreement terminated on July 2, 2019 upon the expiration of the last patent licensed to the Company from Dr. Burzynski.
As of July 2, 2019, all patents previously licensed by the Company under the License Agreement have expired.
Results of Operations
Three Months Ended November 30, 2020 Compared to Three
Months Ended November 30, 2019
Research
and development costs were approximately $230,000 and $340,000 for the three months ended November 30, 2020 and 2019, respectively.
The decrease of $110,000 or 32% was due to a decrease in materials costs of $58,000, personnel costs of $24,000, facility and equipment
costs of $13,000, consulting and quality control costs of $10,000, and other research and development costs of $5,000, as
a result of a reduction of requirements imposed by the Food and Drug Administration.
General
and administrative expenses were approximately $34,000 and $131,000 for the three months ended November 30, 2020 and 2019, respectively.
The decrease of $97,000 or 74% was due to a decrease in legal and other professional costs of $75,000 and other general
and administrative expenses of $22,000 as a result of a reduction in requests from regulatory agencies.
The Company had net losses of approximately
$264,000 and $472,000 for the three months ended November 30, 2020 and 2019, respectively. The decrease in the net loss from 2019
to 2020 is primarily due to an overall decrease in research and development costs and general and administrative expenses of the
Company as described above.
Nine Months Ended November 30, 2020 Compared to Nine
Months Ended November 30, 2019
Research
and development costs were approximately $819,000 and $972,000 for the nine months ended November 30, 2020 and 2019, respectively.
The decrease of $153,000 or 16% was due to a decrease in material costs of $129,000, consulting and quality control costs of $16,000
and other research and development costs of $11,000, offset by an increase in personnel costs of $2,000 and facility and equipment
costs of $2,000, as a reduction of requirements imposed by the Food and Drug Administration.
General and administrative expenses were
approximately $232,000 and $378,000 for the nine months ended November 30, 2020 and 2019, respectively. The decrease of $146,000
or 39% was due to a decrease in other general and administrative expenses of $73,000 and legal and professional fees of $74,000,
as a result of a reduction of requests from regulatory agencies.
The Company had net losses of approximately
$1,051,000 and $1,350,000 for the nine months ended November 30, 2020 and 2019, respectively. The decrease in the net loss from
2019 to 2020 is primarily due to an overall decrease in research and development costs and general and administrative expenses
of the Company as described above.
Liquidity and Capital Resources
The Company’s operations have been
funded entirely by contributions from Dr. Burzynski and from funds generated from Dr. Burzynski’s medical practice.
Effective March 1, 1997, the Company entered into a Research Funding Agreement with Dr. Burzynski (the “Research
Funding Agreement”), pursuant to which the Company agreed to undertake all scientific research in connection with the development
of new or improved Antineoplastons for the treatment of cancer and Dr. Burzynski agreed to fund the Company’s Antineoplaston
research for that purpose. Under the Research Funding Agreement, the Company hires such personnel as is required to conduct Antineoplaston
research, and Dr. Burzynski funds the Company’s research expenses, including expenses to conduct the clinical trials.
Dr. Burzynski also provides the Company laboratory and research space as needed to conduct the Company’s research activities.
The Research Funding Agreement also provides that Dr. Burzynski may fulfill his funding obligations in part by providing the
Company such administrative support as is necessary for the Company to manage its business. Dr. Burzynski pays the full amount
of the Company’s monthly and annual budget of expenses for the operation of the Company, together with other unanticipated
but necessary expenses which the Company incurs.
The amounts which Dr. Burzynski is
obligated to pay under the agreement shall be reduced dollar for dollar by the following: (1) any income which the Company
receives for services provided to other companies for research and/or development of other products, less such identifiable marginal
or additional expenses necessary to produce such income, or (2) the net proceeds of any stock offering or private placement
which the Company receives during the term of the agreement up to a maximum of $1,000,000 in a given Company fiscal year.
The Research Funding Agreement, as amended,
contains an annual automatic renewal provision providing for an additional one-year term, unless one party notifies the other party
at least thirty days prior to the expiration of the then current term of the agreement of its intention not to renew the agreement.
Subject to the foregoing, the term of the Research Funding Agreement was renewed and extended until February 28, 2021. It is expected
that the Research Funding Agreement will continue to renew each year prospectively unless terminated under the provisions of the
agreement.
The Research Funding Agreement automatically
terminates in the event that Dr. Burzynski owns less than fifty percent of the outstanding shares of the Company, or is removed
as President and/or Chairman of the Board of the Company, unless Dr. Burzynski notifies the Company in writing of his intention
to continue the agreement notwithstanding this automatic termination provision.
The Company estimates that it will spend
approximately $300,000 during the remaining quarter of the fiscal year ending February 28, 2021. While the Company anticipates
that Dr. Burzynski will continue to fund the Company’s research and FDA- related costs, there is no assurance that Dr. Burzynski
will be able to continue to fund the Company’s operations pursuant to the Research Funding Agreement or otherwise. In addition,
Dr. Burzynski’s medical practice has successfully funded the Company’s research activities over the last 25 years
and, in 1997, his medical practice was expanded to include traditional cancer treatment options such as chemotherapy, gene-targeted
therapy, immunotherapy and hormonal therapy.
Because the Company currently is entirely
dependent upon the contributions for research provided by Dr. Burzynski under the Research Funding Agreement, the Company
would not be able to continue conducting its clinical trials if Dr. Burzynski ceased funding the Company’s research.
In such event, the Company would be required to find immediate funding which may not be available on acceptable terms or at all.
If this were to occur and the Company were not able to find adequate sources of funding, the Company would be required to cease
operations. Even with Dr. Burzynski’s continued contributions under the Research Funding Agreement, the Company may
be required to seek additional capital through equity or debt financing or the sale of assets until the Company’s operating
revenues are sufficient to cover operating costs and provide positive cash flow; however, there can be no assurance that the Company
will be able to raise such additional capital on acceptable terms to the Company. In addition, there can be no assurance that the
Company will ever achieve positive operating cash flow.