On November 10, 2015 Aptose Biosciences Inc. (NASDAQ:APTO) (TSX:APS) a clinical-stage company developing new therapeutics and molecular diagnostics that target the underlying mechanisms of cancer, reported financial results for the three months ended September 30, 2015 and provided a corporate update (Press release, Aptose Biosciences, NOV 10, 2015, View Source;p=RssLanding&cat=news&id=2111201 [SID:1234508461]). Unless specified otherwise, all amounts are in Canadian dollars.

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Effective July 17, 2014 the Company changed its fiscal year end from May 31 to December 31. As a result of this change, the current interim period being reported is for the three months ended September 30, 2015, while the prior year comparative period is for the four months ended September 30, 2014.

Net loss for the three months ended September 30, 2015 was $3.3 million ($0.27 per share) compared with $4.2 million ($0.36 per share) during the four months ended September 30, 2014. Total cash and cash equivalents and investments at September 30, 2015 were $23.4 million.

"During the third quarter of this year we made steady progress in the clinical development of APTO-253 for AML and other blood cancers and we observed favorable safety and pharmacokinetic data that have allowed us to escalate dosing," said William G. Rice, Ph.D., Chairman, President and Chief Executive Officer. "Likewise, the epigenetic insights gained from studies with APTO-253 have been leveraged as we seek to acquire new agents and expand our oncology pipeline at all development stages. This led us to establish relationships with Moffitt Cancer Center and Laxai Avanti Life Sciences, announced this morning, that provide Aptose with technologies for multi-targeting, single agent epigenetic inhibitors."

Corporate Highlights

Earlier on this day, Aptose announced collaborations with Moffitt Cancer Center, a prominent research institute that provides Aptose with exclusive rights to scientifically intriguing multi-targeting epigenetic inhibitors and with Laxai-Avanti Life Sciences, a medicinal chemistry group that will focus on the optimization of preclinical assets with novel epigenetic-based therapies.
Last week, Aptose announced that preclinical data for its lead investigational anticancer therapeutic APTO-253 will be presented at the 57th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition by researchers from the Knight Cancer Institute at Oregon Health & Science University (OHSU). Data demonstrate the ability of APTO-253 to kill acute myeloid leukemia (AML) cells in the majority of patient samples, with a trend toward correlation with baseline KLF4 expression level. Moreover, APTO-253 demonstrated enhanced efficacy against AML patient samples when combined with either the BET inhibitor JQ1 or with the FLT3 inhibitor quizartinib.

Financial Results

Net loss for the three months ended September 30, 2015 was $3.3 million ($0.27 per share) compared with $4.2 million ($0.36 per share) during the four months ended September 30, 2014. Net loss for the nine months ended September 30, 2015 was $10.2 million ($0.86 per share) compared with $10.8 million ($1.58 per share) during the ten months ended September 30, 2014.
Aptose utilized cash of $2.6 million in operating activities in the three month period ended September 30, 2015 compared with $3.9 million during the four months ended September 30, 2014. The cash utilized in the three month period ended September 30, 2015 is lower than the four months ended September 30, 2014 due to a lower net loss as well as cash used to reduce accounts payable and accrual balances in the prior year period.

Research and Development

Research and development expenses totaled $1.7 million in the three months ended September 30, 2015 compared to $1.3 million during the four months ended September 30, 2014 and totaled $3.9 million for the nine month period ended September 30, 2015 compared with $2.9 million in the ten months ended September 30, 2014.

Components of research and development expenses:

Research and development costs in the three months ended September 30, 2015 increased compared with the four months ended September 30, 2014 due to increased APTO-253 development costs including the ongoing Phase 1b clinical trial of APTO-253 in the current year period compared with no ongoing clinical development in the prior year period, including supplementary personnel to support the trial. In addition we have initiated studies to optimize the formulation of APTO-253 for which no comparable work was ongoing in the prior year period.

The increase in research and development costs during the nine months ended September 30, 2015 compared with the ten months ended September 30, 2014 is the result of increased APTO-253 development costs primarily related to the ongoing Phase 1b clinical trial and associated activities including formulation studies and research support. Increased program expenditures were offset by no severance costs in the nine months ended September 30, 2015 compared with $326 thousand in the ten months ended September 30, 2014 related to severance payments made to the former President and COO.

General and Administrative

General and administrative expenses totaled $2.2 million in the three month period ended September 30, 2015 compared to $3.0 million in the four months ended September 30, 2014. For the nine month period ended September 30, 2015, general and administrative expenses were $7.5 million compared with $7.9 million in the ten months ended September 30, 2014. General and administrative expenses consist of the following:

Components of general and administrative expenses:

General and administrative expenses excluding salaries decreased in the three months ended September 30, 2015 compared with the four months ended September 30, 2014. The decrease over the prior year is attributable to a four month reporting period in the prior year compared with a three month reporting period in the current year.

General and administrative expenses excluding salaries were consistent in the nine months ended September 30, 2015 compared with the ten months ended September 30, 2014 despite the shorter time frame in the current year. Comparing on a three month to three month basis, expenses in the current period increased. The increase is attributable primarily to higher insurance and other costs associated with the Aptose’s NASDAQ listing.

Salary charges in the three and nine month periods ended September 30, 2015 were consistent with salary charges in the four and ten month periods ended September 30, 2014 despite the shorter reporting periods in the current year. General and administrative salary costs are primarily incurred in US dollars and the weakening of the Canadian dollar has increased these costs in the current year compared with the prior year.

Stock-based compensation costs were lower in the three months ended September 30, 2015 compared with the four months ended September 30, 2014. This decrease is the result of large option grants in June and July 2014 which vested 50% in the first year and contribute to higher stock-based compensation expense during the first twelve month period.

Stock-based compensation costs were higher in the nine months ended September 30, 2015 compared with the ten months ended September 30, 2014 due to the option grants in June and July 2014 for which 6-7 months of expense were incurred in the current year compared with only 2-3 months of expense in the prior year period.

Deferred share unit costs relate to the marked-to-market adjustment on units which were settled in April 2014. There were no deferred share units outstanding in the nine month period ending September 30, 2015.

Finance Expense
Finance expense for the three months ended September 30, 2015 was $8 thousand compared with $49 thousand for the four months ended September 30, 2014 and $43 thousand for the nine months ended September 30, 2015 compared with $225 thousand for the ten months ended September 30, 2014.

Finance expense for the three and nine months ended September 30, 2015 relates to interest expense of $6 thousand accrued at a rate of 10% on the remaining balance of convertible promissory notes issued in September 2013 as well as accretion expense related to the conversion feature of the notes. All of the promissory notes had been converted into common shares as of September 30, 2015.

Finance expense for the four and ten months ended September 30, 2014 relates to interest accrued at a rate of 10% as well as accretion expense on the $918 thousand promissory notes issued in June 2013 and repaid in April 2014 as well as interest on the convertible promissory notes issued in September 2013 as described above.

Foreign exchange loss is the result of the fluctuation of rates of exchange between US and Canadian dollars.

Finance Income
Finance income totaled $717 thousand in the three months ended September 30, 2015 compared to $161 thousand in the four months ended September 30, 2014 and $1.2 million in the nine months ended September 30, 2015 compared with $235 thousand in the ten months ended September 30, 2014.

Interest income represents interest earned on our cash and cash equivalent and investment balances. Foreign exchange gains are the result of an increase in the value of US dollar denominated cash and cash equivalents balances during the three and nine months ended September 30, 2015 due to a depreciation of the Canadian dollar compared to the US dollar.