Oncotelic Provides YE 2022 Financial Results Compared to YE 2021 Product Development Initiatives and Corporate Update

AGOURA HILLS, Calif., April 17, 2023 (GLOBE NEWSWIRE) -- Oncotelic Therapeutics, Inc. (“Oncotelic, “We or the “Company”) (OTCQB:OTLC) is providing a summary of its financial results for the year ended December 31, 2022 (“FY 2022”) as compared to the prior year ended December 31, 2021 (“FY 2021”). We are also providing updates on our product and therapeutic development initiatives and other corporate matters. The financial results are based on the 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2023.

FY 2022 compared to FY 2021 Financial Results Overview


    2022     2021     Variance  
Operating expense:                        
Research and development   $ 756,910     $ 3,658,617     $ (2,901,707 )
General and administrative     4,853,664       5,467,266       (613,602 )
Goodwill impairment     4,111,079       -       4,111,079  
Total operating expense     9,721,653       9,125,883       (595.770 )
Loss from operations     (9,721,653 )     (9,125,883 )     595,770  
Interest expense, net     (2,971,046 )     (2,002,813 )     (968,233 )
PPP loan forgiveness     -       346,761       (346,761 )
Reimbursement for expenses – related party     533,485       -       533,485  
Gain on derecognition of non-financial asset     16,951,477       -       16,951,477  
Loss on debt conversion     (257,810 )     (27,504 )     (230,306 )
Change in the value of derivatives on debt     142,150       292,149       (149,999 )
Net income (loss) before controlling interests   $ 4,676,603     $ (10,517,290 )   $ 15,193,894  

Net Income(Loss)

We recorded net income of approximately $4.7 million for the year ended December 31, 2022, compared to a loss of approximately $10.5 million for the year ended December 31, 2021, resulting in a reduced loss of approximately $15.2 million. Factors contributing to our decreased loss are described below.

Research and Development Expense

Research and Development (“R&D”) expenses declined by over $2.9 million, to approximately $0.76 million for the year ended December 31, 2022, as compared to approximately $3.7 million for the year ended December 31, 2021. The primary reason for the decreased R&D activities cost is a reduction in clinical trial costs of $1.8 million, for the trials for OT-101 and Artemisinin, a reduction in compensation costs of approximately $1 million and $0.2 million decrease in operational costs as these costs have been borne by our JV.

General and Administrative Expense

General and administrative (“G&A”) expenses decreased by approximately $0.6 million, from approximately $4.9 million for the year ended December 31, 2022, compared to approximately $5.4 million for the same period of 2021. The primary causes for the decline in G&A expenses was due to reduced compensation costs of approximately $0.8 million and a decrease in legal and professional costs of approximately $0.5 million, offset by an increase of around $0.7 million in non-cash stock-compensation expenses.

Having established the joint venture with GMP Bio, we can now transfer the responsibility for our drug development program, related to OT-101, as well as some or most of our G&A expenses, to GMP Bio.

We do anticipate increasing R&D activities related to apomorphine, the initiation of new clinical trials for our other oncology indications, continuing or expanding on our clinical trials and development of some of our AI based tools and applications for OT-101 and Artemisinin for COVID-19 and other epidemics. As a result, R&D expenses might increase in the future, contingent on our ability to secure sufficient funding to continue planned development operations. In a similar vein, while we may be able to transfer some or most of the responsibility of our G&A expenses to GMP Bio, G&A expenses could increase due to other corporate activities and will be subject to our continuing ability to secure sufficient funding to maintain planned operations.

Goodwill Impairment

We recorded a goodwill impairment of approximately $4.1 million on the approximately $16.2 million goodwill, which we recorded upon our acquisition of PointR, for the year ended December 31, 2022. No similar impairment was recorded for the same period of 2021.

In the third and fourth quarters of 2022, we observed a steep decline of our stock price, the market capitalization of our Company, and the general economic conditions, which adversely impacted the majority of the pharmaceutical and biotechnology industry. These factors indicated a potential impairment to our goodwill. Although we assessed and determined that the AI technologies assets related to the PointR acquisition were not adversely impacted, and the Company continues to develop other newer AI technologies, the substantial reduction of our market capitalization compelled us to record an impairment on the goodwill to the extent of the difference between the net assets of the Company over the fair value based on the market capitalization. This is in accordance with US GAAP and other authoritative accounting literature.

Interest Expense

We recorded interest expense, comprising amortization of debt costs, amounting to approximately $3.0 million for the year ended December 31, 2022, related to debt raised from the various convertible notes and a private placement memorandum as compared to $2.0 million on convertible notes and a portion of the private placement memorandum for the same period of 2021.

PPP Loan Forgiveness

For the year ended December 31, 2021, we recorded a PPP Loan Forgiveness of approximately $0.35 million. No comparable forgiveness was recorded during the year ended December 31, 2022.

Reimbursement of expenses

During the year ended December 31, 2022, the Company was reimbursed approximately $0.5 million, by Autotelic Inc. a related party, for expenses incurred by the Company on behalf of our JV. No comparable reimbursement was made during the year ended December 31, 2021.

Gain on derecognition of non-financial Asset

For the year ended December 31, 2022, we recorded a gain of approximately $16.9 million on the sale of our non-financial asset, OT-101, as our capital contribution to GMP Bio. We adopted fair value measurements, under the equity method, and the gain was net of the asset’s fair value of approximately $22.6 million, reduced by the intangibles’ value of approximately $0.8 million for OT-101 and goodwill value of approximately $4.9 million recorded during the 2019 Merger with Oncotelic Inc. No comparable gain was recorded during the year ended December 31, 2021.

Loss on Conversion of Debt

For the year ended December 31, 2022, we recorded a loss on conversion of debt of approximately $0.3 million, attributable to the difference in fair value compared to the price at which the debt was converted. We recorded a similar loss of $28 thousand for the debt conversion by Peak One and TFK in 2021.

Change in value of derivatives

For the year ended December 31, 2022, we recorded a gain of $0.1 million due to the change in value of derivatives on the notes issued to our CEO and the bridge investors. Correspondingly, during the year concluded December 31, 2021, we recorded a gain of $0.3 million due to the change in value of derivatives on the notes issued to our CEO and the bridge investors.

Liquidity, Financial Condition and Capital Resources ($s in ‘000’s)

    December 31, 2022     December 31, 2021  
Cash, including restricted cash   $ 261     $ 589  
Working capital     (16,620 )     (14,828 )
Stockholders’ Equity     19,193       8,158  

The Company has incurred net losses every year since inception and as of December 31, 2022, had an accumulated deficit of approximately $25.933 million, which includes approximately $4.1 million goodwill impairment recorded during the fourth quarter of 2022. As of December 31, 2022, the Company had approximately $0.3 million in cash and current liabilities of approximately $16.9 million, with approximately $1.3 million being net assumed liabilities of the Company as part of the Oncotelic Inc. reverse merger, $4.1 million of debt for conducting clinical trials for OT-101 from GMP and $2.6 million in contingent liability to issue common shares to PointR shareholders upon achievement of certain specific milestones.

For more information on our financial condition, please refer to our 2022 Annual Report on form 10-K filed with the SEC on April 14, 2023.

Cash Flows ($s in ‘000s)

    Year ended December 31,  
    2022     2021  
Net cash used in operating activities   $ (1,453 )   $ (4,434 )
Net cash provided by financing activities     1,125       4,529  
Increase/ (decrease) in cash   $ (327 )   $ 95  

Operating Activities

Net cash used in operating activities totaled approximately $1.5 million for the year ended December 31, 2022. The net income of approximately $4.7 million primarily decreased by approximately $17 million due to a non-cash gain recorded upon derecognition of our non-financial assets and approximately $0.1 million resulting from a change in fair value of derivatives. Net cash mainly increased by approximately $4.1 million due to goodwill impairment, approximately $2.0 million of amortization of debt and finance discounts, approximately $2.9 million of non-cash stock-based expense on issuance of warrants, approximately $0.9 million of stock compensation, approximately $0.3 million of loss on conversion of debt and approximately $0.8 million due to changes in operating assets and liabilities.

Financing Activities

For the year ended December 31, 2022, net cash provided by financing activities was approximately $1.1 million. Net cash provided was due to approximately $0.2 million raised from sale of common stock under the equity purchase agreement with Peak One and approximately $1.0 million raised through issuance of convertible debt.

2022 Business Highlights

In 2022 and continuing in the first quarter of 2023, the Company has made significant progress in various areas. This included the initiation of several clinical trials, in a wide range of indications, such as pancreatic cancer, melanoma, and mesothelioma. The Company also attended and participated in over ten different conferences and events during 2022 and made presentations at several. In April, we completed our much-anticipated joint venture (“JV”), GMP Biotechnology Limited (“GMP Bio”), with Dragon Overseas Capital Limited (“Dragon Overseas”). In October 2022, we established the animal health division for the Company, which led to the formation of Pet2DAO, Inc. The Company was also awarded funding from the Biomedical Advanced Research and Development Authority (“BARDA”) for the development of OT-101 for long COVID-19. The award was under the EZ-BAA funding program. We were awarded up to $750,000, the maximum award under the EZ-BAA program.

Highlights post close of FYE 2022:

“FY 2022 was a challenging yet exciting year for all of us at Oncotelic,” said Amit Shah, CFO of Oncotelic. “We anticipate FY 2023 to be even more exciting, with the completion and the evolution of our JV, enabling the rapid development of the OT-101 asset. Moving forward, with the Company’s cash requirement significantly reduced due to offloading the development and commercialization costs related to OT-101, as well as a considerable portion of our G&A expenses, we anticipate a substantial decrease in our operational expenses related to OT-101. However, this does not include any funds we may have to raise to develop our other products and G&A expenses related to the Company. We are also evaluating and considering uplisting the Company to a national stock exchange to complete the corporate turnaround."

Additional information is included in the Company’s Form 10-K for the year ended December 31, 2022, filed on April 14, 2023, a copy of which is available free of charge at https://www.oncotelic.com/sec-filings/.

Recent Corporate Update

In November 2022, the Company established a Decentralized Autonomous Organization (“DAO”) entity, Pet2DAO, Inc. (“Pet2DAO”), as a wholly owned subsidiary. A DAO is an emerging legal structure, with no central governing body, where members share a common goal to act in the entity’s best interest. Pet2DAO is a DAO technology company, combining traditional corporate governance with innovative DAO architecture. The Company aims to engage stakeholders, build value through the DAO, and maintain traditional corporate rigor, including governance, compliance, and accountability by bringing together public company veterans and innovators in AI, blockchain and Web3. The Company will issue regular tokens and non-fungible tokens (“NFT” and collectively “Tokens”) of Pet2DAO, called PDAO, to its employees, shareholders and key opinion leaders (“KOLs’), using the Tokens to propose and vote on various programs. In the future, the Company intends to register these tokens with the SEC to enable free trading at a later date. Additionally, in April 2023, we announced that eligible shareholders could claim PDAO tokens to participate in the subsidiary to make proposals and vote on such proposals. Eligible shareholders have 4 months from April 1st, 2023, until July 31, 2023, to claim the Tokens, with 1 PDAO Token issued for every 2,000 Company shares owned by the shareholder as of April 1st, 2023. As previously announced, no fractional Tokens will be issued. For instance, a shareholder owning 4,500 OTLC shares on April 1st, 2023, would receive 2 PDAO Tokens.

Recent Product Development Highlights

In January 2023, we announced the submission of a clinical study protocol to the US Food and Drug Administration ("US FDA") for initiating a Phase 2b/3 Trial (designated "P201") for OT-101, the Company's transforming growth factor beta 2 ("TGF-β2") inhibitor, as a treatment for metastatic pancreatic cancer. This study will be funded by our JV. The study is titled P201: A Randomized Phase 2b/Phase 3 Study of the TGF-β2 Targeting Antisense Oligonucleotide OT-101 in Combination with FOLFOX Compared with FOLFOX Alone as Second-Line Therapy in Patients with Metastatic Pancreatic Cancer that has Progressed During or Following a First-Line Gemcitabine-Containing Regimen.

In February 2023, we announced the initiation of a second investigator initiated study (IIS) in a series of planned clinical studies. This study will also be funded by our JV. We submitted a protocol, to the US FDA, for a study with approximately 30 patients with non-small cell lung cancer in collaboration with the Fred Hutchinson Cancer Center and a large pharmaceutical company in the field of immuno-oncology. The study will combine our oligodeoxynucleotide OT-101 and a US FDA approved anti-PD-L1 checkpoint inhibitor.

With these two studies, we now have a total of four planned studies, including two that were planned in 2022, for pediatric gliomas and mesothelioma. We continue to work on planning up to 10 studies, including both IIS and our own studies. In addition to these studies, we have a program with BARDA to conduct a study for long COVID-19, related to OT-101 based on our clinical trial in South America.

About Oncotelic

Oncotelic Therapeutics, Inc. (f/k/a Mateon Therapeutics, Inc.) (“Oncotelic”), was formed in the State of New York in 1988 as OXiGENE, Inc., was reincorporated in the State of Delaware in 1992, and changed its name to Mateon Therapeutics, Inc. in 2016, and Oncotelic Therapeutics, Inc. in November 2020. Oncotelic conducts business activities through Oncotelic and its wholly-owned subsidiaries, Oncotelic, Inc., a Delaware corporation, PointR Data, Inc. (“PointR”), a Delaware corporation, Pet2DAO, Inc., a Delaware and EdgePoint AI, Inc. (“Edgepoint”), a Delaware Corporation for which there are non-controlling interests, (Oncotelic, Oncotelic Inc., PointR, Pet2DAO and Edgepoint are collectively called the “Company” or “We”). The Company is currently developing OT-101 for various cancers and COVID-19 through its joint venture, GMP Biotechnology Limited (“GMP Bio”), with Dragon Overseas, Limited (“Dragon”), Artemisinin for COVID-19 and AI technologies for clinical development and manufacturing. The Company has acquired apomorphine for Parkinson’s Disease, erectile dysfunction and female sexual dysfunction. In addition, the Company is evaluating the further development of its product candidates OXi4503 as a treatment for acute myeloid leukemia and myelodysplastic syndromes and CA4P in combination with a checkpoint inhibitor for the treatment of advanced metastatic melanoma. The Company is also planning to address the animal health industry through Pet2DAO.

About AL-101

We acquired AL-101, during the 4th quarter of 2021, for the intranasal delivery of apomorphine. We intend to develop AL-101 for the treatment of PD. Over 60,000 new patients are being diagnosed with PD in the United States. Currently there are over 1 million patients in the US and expected to increase to over 1.2 million by 2030. In addition, approximately 10 million suffer from this disease globally. https://www.parkinson.org/Understanding-Parkinsons/Statistics. AL-101 is also being developed for ED. ED is the most prevalent male sexual disorder globally. The percentages of men affected by ED are as follows: 14.3-70% of men aged ≥60 years, 6.7-48% of men aged ≥70 years, and 38% of men aged ≥80 years (Geerkens MJM et al. (2019). Eur Urol Focus. pii: S2405-4569(19)30079-3). However, with the increasing administration of PDE5 inhibitors in clinical practice, it was found that approximately 30-35% of ED patients are treatment failures (McMahon CN et al. (2006). BMJ, 332: 589-92). AL-101 is designed to target treatment failure ED patients who do not respond to PDE5 inhibitors. Through similar mechanism of action, AL-101 is being developed for FSD. Female sexual dysfunction is a prevalent problem, afflicting approximately 40% of women and there are few treatment options. FSD is more typical as women age and is a progressive and widespread condition. (Allahdadi, KJ et al. (2009) Cardiovascular & hematological agents in medicinal chemistry, 7(4), 260–269). There is no available drug for the treatment of FSD. In June 2019, the U.S. Food and Drug Administration approved Vyleesi (bremelanotide) to treat acquired, generalized HSDD in premenopausal women. This is the only available drug treatment. Vyleesi has essentially replaced the only other drug for HSDD – however, it has a long list of drug-drug interactions, including commonly used antidepressants, such as fluoxetine and sertraline. In addition, it has a black box warning regarding its use with alcohol, a combination that has been associated with hypotension and syncopal episodes. Therefore, there is an urgent need for effective therapy against FSD and HSDD.

For more information, please visit www.oncotelic.com and refer to our 2022 Annual Report on Form 10-K filed with the SEC on April 14, 2023.

Oncotelic's Cautionary Note on FORWARD-LOOKING STATEMENTS

This 2022 Press Release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) that involve substantial risks and uncertainties. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “aim,” “project,” “believe,” “estimate,” “predict,” “potential,” “seek,” “indicate,” or “continue” or the negative of these terms or other similar words, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, such as our estimates regarding anticipated operating income or losses, future performance, future revenues and projected expense, including that to fund our clinical and other development programs; our liquidity and our expectations regarding our needs for and ability to raise additional capital; our ability to continue as a going concern; our ability to select and capitalize on commercially desirable product opportunities as a result of limited financial resources; our ability to manage our expenses effectively and raise the funds needed to continue our business; our ability to retain the services of our current or future executive officers, directors and principal consultants; the competitive nature of our industry and the possibility that our products or product candidates may become obsolete or may not generate revenues as expected or at all; our ability to obtain and maintain regulatory approval of our existing products and any future products we may develop; the development of and the process of commercializing AI/Blockchain and other technologies for supporting the development of OT-101 and Artemisinin for COVID-19, OT-101, including development of OT-101, Artemisinin, OXi4503, CA4P and our 2021 in-licensing of apomorphine; the initiation, timing, progress and results of our preclinical and clinical trials, research and development programs; regulatory and legislative developments in the United States and foreign countries; the timing, costs and other limitations involved in obtaining regulatory approval for any product; the further preclinical or clinical development and commercialization of our product candidates; the entering into any corporate transactions to develop our products through partnerships, joint ventures or other corporate transactions; our ability to make a proposed initial public offering between us and our joint-venture partners for the joint venture: building and the success of our nanoparticle platform and the related success of launching the platform, the success of the launch of Pet2DAO, a corporation with a DAO infrastructure, the success of Pet2DAO and the plans surrounding the pet and animal health, the ability for the Company to register the tokens of Pet2DAO, the actual filing of a registration statement and approval of the tokens as registrable securities with the Securities and Exchange Commission (“SEC”) through a registration statement, the ability of the tokens to be tradable or any value such tokens may have if they become tradable; our ability to obtain and maintain orphan drug exclusivity for some of our product candidates; the potential benefits of our product candidates over other therapies; our ability to enter into and maintain any collaboration with respect to product candidates; our ability to continue to develop or commercialize our products or product candidates in the event any license agreements in place with third parties expire or are terminated; the performance and conduct of third parties, including our third-party manufacturers and third party service providers used in our clinical trials; our ability to obtain and maintain intellectual property protection for our products and operate our business without infringing upon the intellectual property rights of others; the potential liability exposure related to our products and our insurance coverage for such exposure; our ability to form alliances with other third parties to develop the products in our pipeline through partnerships, joint ventures, mergers or acquisitions; the successful development of our sales and marketing capabilities; the size and growth of the potential markets for our products and our ability to serve those markets; the rate and degree of market acceptance of any future products; the volatility of the price of our common stock; the ability to achieve secondary trading of our stock in certain states; the dilutive effects of potential future equity issuances; our expectation that no dividends will be declared on our common stock in the foreseeable future; our ability to maintain an effective system of internal controls; the payment and reimbursement methods used by private or governmental third-party payers; our ability to retain adequate staffing levels; unfavorable global economic conditions; unfavorable global epidemic and pandemic conditions; a failure of our internal computer systems or those of our contractors and consultants; potential misconduct or other improper activities by our employees, contractors or consultants; the ability of our business continuity and disaster recovery plans to protect us in the event of a natural disaster; and other factors discussed elsewhere in this document or any document incorporated by reference herein or therein.

The forward-looking statements contained in this document are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve several risks, uncertainties (many of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these “forward-looking statements.” These risks have been described in more detailed in our 2022 Annual Report on form 10-K filed with the SEC on April 14, 2023. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The sections captioned “Risk Factors” as well as other sections in this document or incorporated by reference into this document discuss some of the factors that could contribute to these differences. The forward-looking statements made in this press release relate only to events known as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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