UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED - OCTOBER 31, 2018
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 000-28489
ADVAXIS, INC.
(Name of Registrant in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
305 College Road East
Princeton, New Jersey
(Address of Principal Executive Offices)
02-0563870
(I.R.S. Employer
Identification No.)
08540
(Zip Code)
(609) 452-9813
(Issuer’s Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Common stock - $0.001 par value
NASDAQ Capital Market
Securities registered under Section 12(g) of the Exchange Act:
[None]
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
/
period that the registrant was required to submit such files).
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
[ ]
Large Accelerated Filer
Non-accelerated Filer
[ ]
Emerging growth company [ ]
Accelerated Filer
Smaller Reporting Company
[X]
[X]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of April 30, 2018, the aggregate market value of the voting common equity held by non-affiliates was approximately
$82,957,000, based on the closing bid price of the registrant’s common stock on the NASDAQ Capital Market. (For purposes of
determining this amount, only directors, executive officers, and 10% or greater shareholders and their respective affiliates have
been deemed affiliates). [X]
The registrant had 69,703,219 shares of common stock, par value $0.001 per share, outstanding as of December 31,
2018.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant’s 2019 Annual Meeting of Stockholders (the “Proxy Statement”) to be
filed within 120 days of the end of the fiscal year ended October 31, 2018 are incorporated by reference into Part III hereof.
Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to
be filed as a part hereof.
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PART 1
Table of Contents
Form 10-K Index
Business
Item 1:
Item 1A: Risk Factors
Item 1B: Unresolved Staff Comments
Item 2:
Item 3:
Item 4:
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5:
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6:
Item 7:
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Item 8:
Item 9:
Item 9A: Controls and Procedures
Item 9B: Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
PART III
Item 10: Directors, Executive Officers, and Corporate Governance
Item 11:
Item 12:
Item 13: Certain Relationships and Related Transactions, and Director Independence
Item 14:
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Principal Accounting Fees and Services
Part IV
Item 15:
Item 16:
Exhibits, Financial Statements Schedules
Form 10-K Summary
Signatures
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PART 1
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K (“Form 10-K”) includes statements that are, or may be deemed to be, “forward-
looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology,
including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,”
“should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although not
all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-K and include
statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other
things, our ongoing and planned discovery and development of drug candidates, the strength and breadth of our intellectual
property, our ongoing and planned preclinical studies and clinical trials, the timing of and our ability to make regulatory filings
and obtain and maintain regulatory approvals for our product candidates, the degree of clinical utility of our product candidates,
particularly in specific patient populations, expectations regarding clinical trial data, our results of operations, financial
condition, liquidity, prospects, growth and strategies, the length of time that we will be able to continue to fund our operating
expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and
the trends that may affect the industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive
dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may
not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a
reasonable basis for each forward-looking statement contained in this Form 10-K, we caution you that forward-looking
statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity,
and the development of the industry in which we operate may differ materially from the forward-looking statements contained in
this Form 10-K. In addition, even if our results of operations, financial condition and liquidity, and the development of the
industry in which we operate are consistent with the forward-looking statements contained in this Form 10-K, they may not be
predictive of results or developments in future periods.
Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:
● the success and timing of our clinical trials, including patient accrual;
● our ability to obtain and maintain regulatory approval and/or reimbursement of our product candidates for marketing;
● our ability to obtain the appropriate labeling of our products under any regulatory approval;
● our plans to develop and commercialize our products;
● the successful development and implementation of future sales and marketing campaigns;
● the change of key scientific or management personnel;
● the size and growth of the potential markets for our product candidates and our ability to serve those markets;
● our ability to successfully compete in the potential markets for our product candidates, if commercialized;
● regulatory developments in the United States and foreign countries;
● our ability to continue as a going concern
● the rate and degree of market acceptance of any of our product candidates;
● new products, product candidates or new uses for existing products or technologies introduced or announced by our
competitors and the timing of these introductions or announcements;
● market conditions in the pharmaceutical and biotechnology sectors;
● our available cash;
● the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional
financing;
● our ability to obtain additional funding;
● our ability to obtain and maintain intellectual property protection for our product candidates;
● the success and timing of our preclinical studies including IND enabling studies;
● the ability of our product candidates to successfully perform in clinical trials and to resolve any clinical holds that may
occur;
● our ability to obtain and maintain approval of our product candidates for trial initiation;
● our ability to manufacture and the performance of third-party manufacturers;
● our ability to identify license and collaboration partners and to maintain existing relationships;
● the performance of our clinical research organizations, clinical trial sponsors and clinical trial investigators, and
collaboration partners for any clinical trials we conduct; and
● our ability to successfully implement our strategy.
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Any forward-looking statements that we make in this Form 10-K speak only as of the date of such statement, and we
undertake no obligation to update such statements to reflect events or circumstances after the date of this Form 10-K. You should
also read carefully the factors described in the “Risk Factors” section of this Form 10-K to better understand the risks and
uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot
assure you that the forward-looking statements in this Form 10-K will prove to be accurate.
This Form 10-K includes statistical and other industry and market data that we obtained from industry publications and
research, surveys and studies conducted by third-parties. Industry publications and third-party research, surveys and studies
generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee
the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys
and studies are reliable, we have not independently verified such data.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our
forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
In this Form 10-K, unless otherwise stated or the context otherwise indicates, references to “Advaxis,” “the Company,”
“we,” “us,” “our” and similar references refer to Advaxis, Inc., a Delaware corporation.
Item 1. Business.
General
Advaxis, Inc. (“Advaxis” or the “Company”) is a late-stage biotechnology Company focused on the discovery,
development and commercialization of proprietary Listeria monocytogenes (“Lm”) Technology antigen delivery products based
on a platform technology that utilizes live attenuated Lm bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-
based strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions into a single
immunotherapy and are designed to access and direct antigen presenting cells to stimulate anti-tumor T cell immunity, activate
the immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the Tumor
Microenvironment (“TME”) to enable T cells to eliminate tumors. The Company believes that Lm Technology immunotherapies
can complement and address significant unmet needs in the current oncology treatment landscape. Specifically, the Company’s
product candidates have the potential to optimize the clinical impact of checkpoint inhibitors while having a generally well-
tolerated safety profile. The Company’s passion for the clinical potential of Lm Technology is balanced by focus and fiscal
discipline which is directed towards improving treatment options for cancer patients and increasing shareholder value.
Advaxis is focused on four product-related areas in various stages of clinical and pre-clinical development, which they
believe will provide the greatest opportunity to have a significant impact on patients and their families:
● Human Papilloma Virus (“HPV”)-associated cancers
● Personalized neoantigen-directed therapies
● Disease focused hotspot/‘off the shelf’ neoantigen-directed therapies
● Prostate cancer
All four product areas are anchored in the Company’s Lm TechnologyTM, a unique platform designed for its ability to
target various cancers in multiple ways. As an intracellular bacterium, Lm is an effective vector for the presentation of antigens
through both the Major Histocompatibility Complex (“MHC”) I and II pathways, due to its active phagocytosis by Antigen
Presenting Cells (“APCs”). Within the APCs, Lm produces virulence factors which allow survival in the host cytosol and potently
stimulate the immune system.
Through a license from the University of Pennsylvania, Advaxis has exclusive access to a proprietary formulation of
attenuated Lm that we call Lm Technology. Lm Technology is designed to optimize this natural system, and one of the keys to the
enhanced immunogenicity of Lm Technology is the tLLO – fusion protein, which is made up of tumor associated antigen (“TAA”)
fused to a highly immunogenic bacterial protein that triggers potent cellular immunity. The tLLO -fusion protein is also designed
to help reduce immune tolerance in the TME and to promote antigen spreading, thereby improving activity in the TME. Multiple
copies of the tLLO -fusion protein within each construct may increase antigen presentation and TME impact.
As the field of immunotherapy continues to evolve, the flexibility of the Lm Technology platform has allowed Advaxis
to develop highly innovative products. To date, Lm Technology has demonstrated preclinical synergy with multiple checkpoint
inhibitors, co-stimulatory agents and radiation therapy, with a clinical trial currently underway in combination with Merck & Co.,
Inc.’s (“Merck”) PD-1 inhibitor. The safety profile of all Lm Technology constructs seen to date across over 470 patients has been
generally predictable and manageable, consisting mostly of mild to moderate flu-like symptoms that have been transient and
associated with infusion.
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The Advaxis Corporate Strategy
The Advaxis corporate strategy is to advance the Lm Technology platform and leverage its unique capabilities to design
and develop an array of cancer treatments. The Company and its collaborators are currently conducting or planning clinical
studies of Lm Technology immunotherapies in HPV-associated cancers (including cervical and head and neck), prostate cancer,
non-small cell lung cancer and microsatellite stable colorectal cancer.
Moving forward, the Company expects that it will continue to invest in its core clinical program areas and will also
remain opportunistic in evaluating Investigator Sponsored Trials (“ISTs”) as well as licensing opportunities. The Lm Technology
platform is protected by a range of patents, covering both product and process, some of which the Company believes can be
maintained into 2037.
Lm Technology and the Immunotherapy Landscape
The challenge of cancer immunotherapy has been to find the best overall balance between efficacy and side effects when
mobilizing the body’s immune system to fight against cancer. The development of immune checkpoint inhibitors was a significant
step forward, particularly with anti-PD-1 therapies, and brought with it impressive clinical activity in many different types of
cancers, including melanoma, lung, head and neck and urothelial cancers. However, a literature review published in Science in
2018 noted that anti-PD-1 monotherapy response rates are only in the 15-25% range, and rise to ≥ 50% only in selected groups of
patients with desmoplastic melanoma, Merkel carcinoma or tumors with mismatch-repair deficiency. Development of secondary
resistance with disease progression is yet another common limitation of these therapies. Therefore, for most cancer patients, there
is room for improvement. Checkpoint inhibitors can expand existing cancer fighting cells that may already be present in low
numbers and support their activity against cancer cells, but if the right cancer-fighting cells are not present, checkpoint inhibitors
may not provide clinical benefit. Similarly, there are many mechanisms of immune tolerance that are distinct from the
checkpoints which may also be blocking the immune system from fighting cancer. Based on both pre-clinical and early clinical
data, Advaxis believes that checkpoint inhibitors, when combined with treatments such as Lm Technology, can have an amplified
anti-tumor effect. Lm Technology incorporates several complementary elements that include innate immune stimulation, potent
generation of cancer-targeted T cells, ability to boost immunity through multiple treatments, enhancing lymphocyte infiltration
into tumors, reduction of non-checkpoint mediated immune tolerance within the tumor microenvironment, and promotion of
antigen spreading which may amplify the effects of treatment. These results provide rationale for further testing of Lm
Technology agents alone and in combination with checkpoint inhibitors.
Traditional cancer vaccines were another development within immunotherapy and have a history beginning over 30 years
ago. Unfortunately, these vaccines have largely been unsuccessful for a variety of potential reasons. These include poor selection
of targets, imbalanced antigen presentation by inclusion of certain immune enhancing agents (adjuvants), failure to consider the
blocking actions of immune tolerance, and choice of vaccine vectors. In some cases, patients may develop neutralizing antibodies,
preventing further treatments. In contrast to traditional cancer vaccines, Lm Technology takes advantage of a natural pathway in
the immune system that evolved to protect us against Listeria infections, that also happens to generate the same type of immunity
that is required when fighting cancer. The live but weakened (attenuated) bacteria stimulate a balanced concert of innate immune
triggers and present the tumor antigen target precisely where it needs to be able to generate potent cancer fighting cells from
within the immune system itself. The multitude of accompanying signals serves to broadly mobilize most of the immune system
in support of fighting what seems to be a Listeria infection, and is then “re-directed” against cancer cell targets. Additionally, the
unique intracellular lifecycle of Listeria avoids the creation of neutralizing antibodies, thereby allowing for repeat administration
as a chronic therapy with a sustained enhancing of tumor antigen-specific T cell immunity.
Looking back on the last two decades, there have been promising technology advancements to harness and activate killer
T cells against cancers and every day more is learned about the interplay between immunity and cancer that can lead to improved
treatments. However, there are still significant unmet needs in the immunotherapy landscape that Advaxis feels Lm Technology
can address and complement. Specifically, Lm Technology has the potential to optimize and expand checkpoint inhibitor activity
in combination. It also avoids many of the limitations of previous cancer vaccine attempts by tapping into the pathway reserved
for defense against Listeria infection while incorporating the best cancer targets science can identify, including neoantigens that
result from mutations in the cancer. To date, Lm Technology products have a manageable safety profile, do not generate
neutralizing antibodies lending themselves to retreatments, and most of the products are designed to be immediately available for
treatment without the complication and expense of modifying a patient’s own cells in a laboratory.
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Lm Technology: An optimized Listeria -based antigen delivery system
Advaxis’ Listeria-based immunotherapies are designed for antigen delivery through a process of insertion of multiple
copies of the proprietary tLLO -fusion protein into each extrachromosomal protein expression and secretion plasmid that makes
and secretes the target protein right inside the patient’s antigen presenting cells to initiate and/or boost their immune response.
The tLLO-fusion protein approach was developed at the University of Pennsylvania as an improvement over insertion of a single
copy of the target gene, as an ACT-A (or other Lm peptide) fusion, within the bacterial genome for four key reasons:
2.
1. Multiple copies of the DNA in the plasmids per bacteria can result in larger amounts of tLLO-fusion protein being
expressed simultaneously, versus a single copy. This is designed to improve antigen presentation and immunologic
priming and increases the number of T cells generated for a particular treatment.
tLLO expressed on plasmids (with or without a tumor target protein attached) has been shown preclinically to reduce
numbers and immune suppressive function of Tregs and MDSCs in the tumor microenvironment. Presented
preclinical data demonstrates that Tregs are destroyed as soon as five days after the first Lm Technology treatment
and that suppressive M2 tumor-associated macrophages (TAMs) are replaced by M1 macrophages which support
antigen presentation and adoptive immunity.
3. The extrachromosal DNA plasmids themselves also contain CPG sequence patterns that trigger TLR-9, which
confers additional innate immune stimulation beyond a listeria without the plasmids.
4. The multiple copies of bacterial DNA plasmids (up to 80-100 per bacteria) confers additional stimulation of the
STING receptor within APC’s which has been associated with enhancing anti-cancer immunity in patients.
Through a license from the University of Pennsylvania, Advaxis has exclusive access to this proprietary formulation of
attenuated Lm which further enhances what we believe to be a nearly ideal natural system. Clinical application in the Company’s
four program areas is the core focus of current development efforts.
Clinical Pipeline
Advaxis is focused on the discovery, development and commercialization of proprietary Lm Technology antigen delivery
products, with its latest stage program for cervical cancer in Phase 3 development. The Company and its collaborators are
currently conducting or planning clinical studies of Lm Technology immunotherapies in four program areas:
● Human Papilloma Virus (“HPV”)-associated cancers
● Personalized neoantigen-directed therapies
● Disease focused hotspot/‘off the shelf’ neoantigen-directed therapies
● Prostate cancer (ADXS-PSA)
As a late-stage biotechnology company with no commercial products, Advaxis is aware of the need for fiscal responsibility,
and is focusing its investment into the four program areas listed above. Additionally, the company will continue to be
opportunistic by exploring ISTs, licensing and other external opportunities.
Advaxis Pipeline of Product Candidates
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HPV-Related Cancers: Proof of Concept of Lm Technology
The Company is developing therapies for HPV-related cancers using axalimogene filolisbac (AXAL). Axalimogene
filolisbac is an Lm–based antigen delivery product directed against HPV and designed to target cells expressing HPV. The
company’s HPV-related products are currently under investigation, or being considered, in two HPV-associated cancers: cervical
cancer and head and neck cancer, either as a monotherapy or in combination. Advaxis has also completed treatment in two Phase
2 studies of axalimogene filolisbac for the treatment of anal cancer and has decided to not pursue further studies in this cancer
type at this time.
Cervical Cancer: axalimogene filolisbac
HPV is the most common viral infection of the reproductive tract and is the cause of a range of conditions in both
females and males. In women, persistent infection with specific oncogenic types of HPV (most frequently alpha7 and alpha9
families) may lead to precancerous lesions which, if untreated, may progress to cervical cancer. There are approximately 527,000
new cases of cervical cancer caused by HPV worldwide every year, and 12,000 new cases in the U.S. alone, according to the
World Health Organization (“WHO”) Human Papillomavirus and Related Cancers in the World Summary Report 2017. There are
approximately 4,250 deaths from cervical cancer each year according to the National Institutes of Health. Current preventative
HPV vaccines such as Gardasil® and Cervarix® cannot treat or protect the large population of adults already infected with the
virus, leaving several generations of women vulnerable. Furthermore, challenges with acceptance, accessibility, and compliance
have resulted in suboptimal vaccination rates, with approximately 50% of young women and 38% of young men being fully
vaccinated in the United States, according to statistics published by the Centers for Disease Control in 2017. Vaccination rates are
even lower in other countries around the world.
Axalimogene filolisbac has received FDA orphan drug designation for invasive International Federation of Gynecology
and Obstetrics (“FIGO”) Stage II-IV cervical cancer and has received Fast Track designation from the FDA for the treatment of
high-risk locally advanced cervical cancer. Axalimogene filolisbac has also been classified as an advanced-therapy medicinal
product (“ATMP”) for the treatment of cervical cancer by the European Medicines Agency’s (“EMA”) Committee for Advanced
Therapies (“CAT”). The CAT is the EMA’s committee responsible for assessing the quality, safety and efficacy of ATMPs. The
Company completed the CAT certification procedure and the CAT certified that the preclinical and quality information have met
the scientific and technical standards for a Marketing Authorization Application (MAA).
Phase 2 Trial Results – axalimogene filolisbac
In 2014, the company completed a randomized Phase 2 clinical trial (Lm -LLO-E7-15) with AXAL +/- chemotherapy in
109 women, conducted in India, with recurrent/refractory cervical cancer. The final results were presented at the 2014 American
Society of Clinical Oncology (“ASCO”) Annual Meeting and showed that 32% (35/109) of patients were alive at 12 months, 22%
(24/109) of patients were Long-term Survivors (“LTS”) alive greater than 18 months, and 18% (16/91) evaluable with adequate
follow-up of patients were alive for more than 24 months. Of the 109 patients treated in the trial, LTS included not only patients
with tumor shrinkage but also patients who had experienced stable disease or increased tumor burden. 17% (19/109) of the
patients in the trial had recurrence of disease after at least two prior treatments for their cervical cancer; these patients comprised
8% (2/24) of LTS. Among the LTS, 25% (3/12) of patients had a baseline Eastern Cooperative Oncology Group (“ECOG”)
performance status of 2, a patient population that is often excluded from clinical trials. Furthermore, a 10% objective response
rate (including 5 complete responses and 6 partial responses) and a disease control rate of 38% (42/109) were observed. The
addition of cisplatin chemotherapy to axalimogene filolisbac in this trial did not significantly improve overall survival or
objective tumor response (p =0.9981).
In this trial, 109 patients received 254 doses of axalimogene filolisbac. Axalimogene filolisbac was found to be well
tolerated with 38% (41/109) of patients experiencing mild to moderate Grade 1 or 2 transient adverse events associated with
infusion; 1 patient experienced a Grade 3 Serious Adverse Events (“SAE”). All observed treatment-related adverse events either
self-resolved or responded readily to symptomatic treatment.
Based on these results, the Gynecological Oncology Group (“GOG”) Foundation, Inc. (now a member of NRG
Oncology), under the sponsorship of the Cancer Therapy Evaluation Program (“CTEP”) of the National Cancer Institute (“NCI”),
conducted GOG-0265, an open-label, single-arm Phase 2 trial of axalimogene filolisbac in persistent or recurrent cervical cancer
(patients must have received at least 1 prior chemotherapy regimen for the treatment of their recurrent/metastatic disease, not
including that administered as a component of primary treatment) at numerous clinical sites in the U.S. The trial was a Simon 2-
stage design, with the primary efficacy endpoint being 12-month survival, with the objective of the secondary efficacy endpoints
to evaluate progression-free survival, overall survival and objective tumor response. The primary safety endpoints were to
evaluate the number of patients with dose-limiting toxicities and the frequency and severity of adverse effects.
To evaluate the trial’s primary endpoint of 12-month overall survival rate, the GOG’s protocol featured a prospectively-
defined logistic model-based calculation of the expected 12-month survival rate using key predictive factors significantly related
to survival and derived from 17 serially conducted GOG/NRG 2-stage studies of inactive agents in persistent/recurrent metastatic
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cervical cancer (“PRmCC”) involving approximately 500 patients. This accumulated data by GOG used a consistent protocol
design and a similar data collection methodology resulting in a robust and homogeneous patient dataset for the per protocol
analysis of the primary endpoint. Per the trial protocol, this logistic model-based calculation was then used as a comparator for
evaluating the 12-month survival rate of axalimogene filolisbac observed in GOG-0265.
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The first stage of enrollment in GOG-0265 was successfully completed with 26 patients treated and met the
predetermined safety and efficacy criteria required to proceed into the second stage of patient enrollment. Clinical data from the
first stage of GOG-0265 was presented at the American Gynecological & Obstetrical Society (“AGOS”) annual meeting in
September 2015. Overall survival at 12 months was 38.5% (10/26) (the predefined criteria for 12-month survival in order to
progress to Stage 2 was ≥20%), and, among patients who had received the full treatment regimen of 3 doses of axalimogene
filolisbac, the 12-month survival rate was 55.6% (10/18). The adverse events observed in the first stage of the trial have been
consistent with those reported in other clinical studies with axalimogene filolisbac.
Stage 2 of the trial began enrollment in February 2015 which included a protocol amendment to allow patients to
continue to receive repeat cycles of therapy until disease progression. Stage 2 enrollment was temporarily suspended with a
clinical hold in October 2015 that resolved in mid-December 2015. Prior to re-initiating enrollment of a new cohort of Stage 2
patients, Advaxis and the GOG Foundation/NRG Oncology examined the 12-month survival rate and safety data obtained from
the 24 patients who had previously enrolled in Stage 2. The Stage 2 population demonstrated that treatment with axalimogene
filolisbac resulted in a 37.5% (9/24) 12-month survival rate. This data was consistent with the findings in Stage 1 that showed a
38.5% 12-month survival rate, despite a greater proportion of Stage 2 patients having previously taken and failed bevacizumab
treatment prior to enrollment. Taken together, the available data from both stages of GOG-0265 comprise a Phase 2 clinical trial
in 50 subjects with a 12 month survival rate of 38% (19/50). The protocol defined logistic model-based calculation of the
expected 12-month milestone survival rate was calculated to be 24.5% using the key predictors from the patients enrolled in the
trial. The 12-month survival rate of 38% for patients receiving axalimogene filolisbac in the trial represented a 52% improvement
over the expected 12-month milestone survival rate of 24.5%.
Overall, 28 out of 50 (56%) patients experienced a Grade 1 or Grade 2 treatment-related adverse event (TRAE)
associated with axalimogene filolisbac infusion. The most common (>30%) Grade 1 or Grade 2 TRAEs were fatigue, chills,
anemia, nausea and fever. Eighteen (36%) patients experienced a Grade 3 TRAE and two patients experienced a Grade 4 AE,
including a Klebsiella lung infection in one patient, and hypotension/cytokine related symptoms in another patient, which were
considered possibly related to treatment.
In October 2016, upon review of these findings, the Company announced early closure of GOG-0265. Results from the
GOG-0265 trial were presented as an oral late-breaker presentation at the Society of Gynecologic Oncology (“SGO”) annual
meeting on March 14, 2017. Based on these data, the Company made a strategic decision to submit for conditional MAA in the
European Union for axalimogene filolisbac to treat metastatic cervical cancer in patients who progress beyond first-line treatment
in March 2018. However, Advaxis withdrew the application in July 2018 based on European Medicines Agency (EMA) feedback
following its initial review indicating the application will likely need additional clinical data to support a conditional approval.
Advaxis also conducted a clinical trial with axalimogene filolisbac through a collaboration agreement with MedImmune,
the global biologics research and development arm of AstraZeneca. This Phase 1/2, open-label, multicenter, dose determination
and expansion cohort trial was designed to determine the recommended Phase 2 dose (“RP2D”) and evaluate the safety and
efficacy of axalimogene filolisbac, in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor,
IMFINZITM (“durvalumab”), as a treatment for patients with metastatic squamous or non-squamous carcinoma of the cervix and
metastatic HPV-associated squamous cell carcinoma of the head and neck (“SCCHN”). The dose determination phase of the trial
is complete. Two dose cohorts were enrolled. Cohort 1 enrolled 5 patients with metastatic cervical cancer who received 1 x 109
cfu of axalimogene filolisbac + 3 mg/mg durvalumab. Cohort 2 enrolled 3 patients with metastatic cervical cancer and 2 patients
with SCCHN who received 1 x 109 cfu of axalimogene filolisbac + 10 mg/mg of durvalumab. No dose-limiting toxicities were
observed in either cohort. The RP2D was determined to be 1 x 10 9 cfu for axalimogene filolisbac + 10 mg/mg for durvalumab.
Preliminary data showed that two patients with metastatic cervical cancer achieved a durable complete response (with
confirmation) and a partial response (without confirmation), respectively.
TRAEs were reported in 91% of patients; the majority were either Grade 1 (64%) or Grade 2 (55%) events. The most
commonly reported TRAEs were chills, fever, nausea and hypotension. Three patients reported Grade 3 TRAEs (1 x 109 + 3
mg/kg - rigor/chills; 1 x 109 + 10 mg/kg - rigor/chills; and 1 x 109 + 10 mg/kg - diarrhea and shortness of breath). One patient
experienced a Grade 4 TRAE of hypotension. As of February 27, 2018, the safety profile of the combination of axalimogene
filolisbac and durvalumab was consistent with previous reported findings for both axalimogene filolisbac and durvalumab
administered as monotherapy. However, on March 9, 2018, a clinical hold was issued for this study following submission by the
Company of a safety report to the FDA regarding a patient death that occurred on February 27, 2018, post-dosing, involving acute
respiratory failure after receiving nine months of combination therapy in the trial. New guidelines for the early detection and
treatment of such rare events were agreed to with the FDA and were implemented in this and all other studies evaluating our Lm-
based drug candidates. The clinical hold was lifted by FDA on July 12, 2018. Enrollment and dosing in all other Advaxis and
durvalumab clinical programs were not affected by the clinical hold.
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In November 2018, the Company announced that enrollment in the Part A expansion phase (N = 20 patients with
SCCHN) and planned Part B expansion phase (N=90 patients with metastatic cervical cancer) had ended in order to maximize the
efficient use of its resources. As of the latest internal data cut-off date of October 10, 2018, 7 patients receiving 1 x 10 9
axalimogene filolisbac + 10 mg/kg durvalumab had been enrolled. In the Part B expansion, a total of 32 patients with metastatic
cervical cancer were randomized to receive either 10 mg/kg durvalumab alone (N=16 patients) or 1 x 10 9 axalimogene filolisbac
+ 10 mg/kg durvalumab (N = 16 patients) expansion phases.
Ongoing Registrational and Phase 3 Study: Axalimogene filolisbac
Women who are diagnosed with high risk, locally-advanced carcinoma of the cervix (“HRLACC”) face a higher chance
that their cancer may recur following initial treatment when compared to earlier stages of the disease. When cervical cancer
recurs, there are very few treatment options and the prognosis is dire. To address this unmet need, in 2016 the Company reached
an agreement with the FDA, under its Special Protocol Assessment (“SPA”) process, for a Phase 3 trial evaluating axalimogene
filolisbac in patients with HRLACC (“AIM2CERV” or “Advaxis Immunotherapy 2 Prevent Cervical Recurrence”) to be
conducted in collaboration with the GOG/NRG Oncology.
AIM2CERV is a double-blind, randomized, placebo-controlled, Phase 3 trial of adjuvant axalimogene filolisbac
following primary chemoradiation treatment of women with HRLACC. The primary objective of AIM2CERV is to compare the
disease free survival of axalimogene filolisbac to placebo administered in the adjuvant setting following standard concurrent
chemotherapy and radiotherapy (“CCRT”) administered with curative intent to patients with HRLACC. Secondary endpoints
include examining overall survival and safety. The company’s goal is to develop a treatment to prevent or reduce the risk of
cervical cancer recurrence after primary, standard of care treatment in women who are at high risk of recurrence. The current trial
design has a planned sample size of 450 subjects to maintain adequate statistical power over a broader range of survival
outcomes, as well as a pre-planned interim analysis (IA) of safety and efficacy. However, the Company has been evaluating the
possibility of accelerating the IA timeline and establishing a more stringent futility boundary. The Company anticipates that in
early 2019 it will finalize the redesign of the trial and review it with the FDA. During this time, the study is continuing to enroll
patients under its current design, which is being conducted under a Special Protocol Assessment with the FDA.
HPV Program Licensing Agreements
Biocon Limited (“Biocon”), our co-development and commercialization partner for axalimogene filolisbac in India and
key emerging markets, filed a Marketing Authorization Application (“MAA”) for licensure of this immunotherapy in India. The
companies will evaluate next steps regarding potential registration in India.
Especificos Stendhal SA de CV (“Stendhal”), the Company’s co-development and commercialization partner for
axalimogene filolisbac in Mexico, Brazil, Colombia and other Latin American countries, agreed to pay $10 million (“Support
payment”) towards the expense of AIM2CERV over the duration of the trial, contingent upon Advaxis achieving annual project
milestones, pursuant to a Co-Development and Commercialization Agreement (the “Stendhal Agreement”). The Company is
currently in arbitration proceedings with Stendhal, see Legal Proceedings in Note 10 to the financial statements.
Knight Therapeutics Inc. (“Knight”), holds an exclusive license to commercialize axalimogene filolisbac in Canada, as
well as other product candidates.
Advaxis granted Global BioPharma (“GBP”) an exclusive license for the development and commercialization of
axalimogene filolisbac for the treatment of cervical cancer in Asia, Africa, and the former USSR territory, exclusive of India and
certain other countries. GBP is responsible for all development and commercial costs and activities associated with the
development in their territories.
Head and Neck Cancer
Squamous Cell Carcinoma of the Head and Neck (“SCCHN”) is the most frequently occurring malignant tumor of the
head and neck and is a major cause of morbidity and mortality worldwide. More than 90% of SCCHNs originate from the
mucosal linings of the oral cavity, pharynx, or larynx and 70% of these cancers are caused by HPV. According to the American
Cancer Society, head and neck cancer accounts for about 3% of all cancers in the United States. But while the Pap smear and
other HPV tests have reduced rates of cervical cancer, rates of oral cavity and pharynx cancer are growing, with 51,540 new cases
projected to be diagnosed in the United Stated in 2018 according to the Surveillance, Epidemiology, and End Results (“SEER”)
database.
A study published in the Annals of Internal Medicine found that approximately 12% of U.S. men and 3% of women
were actively infected with oral HPV between 2011 and 2014. That totals 11 million men and 3 million women who are at risk for
developing SCCHN. SCCHN is typically asymptomatic until it has metastasized, and screening options do not exist. The only
way to prevent infection is the HPV vaccine, but compliance has been low to date. Another challenge is that preventative vaccines
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cannot protect those already infected or older than 26, leaving several generations of Americans vulnerable to SCCHN with no
way of knowing if cancer is silently growing.
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We conducted a clinical trial in collaboration with MedImmune to collaborate on a Phase 1/2, open-label, multicenter,
two part trial to evaluate safety and efficacy of axalimogene filolisbac, in combination with durvalumab (MEDI4736), for patients
with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. Part 1 of this trial is
complete and results will be presented in 2019. The Company and MedImmune have decided to not continue further enrollment
into the expansion phases of this study.
The Company plans to initiate an investigator-sponsored trial with a major research center in head and neck cancer in
early 2019. Axalimogene filolisbac has received FDA orphan drug designation for HPV-associated head and neck cancer.
Personalized Neoantigen-directed Therapies (ADXS-NEO)
Lm Technology is an effective vector for immunotherapy, and the Company made the decision to branch into the
growing field of individualized cancer treatments with ADXS-NEO. ADXS-NEO is designed to create individualized therapies
by activating the patient’s immune system to respond against multiple mutations, or neoantigens, identified from an individual
patient’s tumor through DNA sequencing. In August 2016, Advaxis entered into a global agreement with Amgen for the
development and commercialization of ADXS-NEO. On December 10, 2018, Company received a written notice of termination
of such agreement from Amgen. See Note 9 to our financial statements. The termination is effective as of February 8, 2019. The
Company’s ADXS-NEO study is currently enrolling patients and the Company will evaluate whether to re-partner the ADXS-
NEO program.
ADXS-NEO is an individualized Lm Technology antigen delivery product developed using whole-exome sequencing of
a patient’s tumor to identify neoantigens. ADXS-NEO is designed to work by presenting a large payload of neoantigens directly
into dendritic cells within the patient’s immune system and stimulating a T cell response against cancerous cells.
The FDA allowed the IND application of ADXS-NEO. In June 2018, the Company announced the commencement of a
Phase 1 trial with the dosing of the first patient with ADXS-NEO. ADXS-NEO is being evaluated in an open-label, dose-
escalation, multicenter clinical trial in the United States. The study is open to patients with metastatic non-small cell lung cancer
(NSCLC), metastatic microsatellite stable colon cancer and metastatic squamous head and neck cancer. The study had been in
development in collaboration with Amgen until December 2018, when Amgen provided the Company with a notice of
termination of their existing collaboration. Advaxis will evaluate whether to re-partner the ADXS-NEO program. Advaxis
anticipates providing safety, tolerability and immune correlative data from the first two cohorts in the first half of 2019.
The Company has entered into various research collaborations, including with the Parker Institute for Cancer
Immunotherapy, to advance the trial of neoepitope-based, personalized cancer therapy as part of the Tumor neoantigEn SeLection
Alliance (“TESLA”) initiative.
Disease focused hotspot/‘off the shelf’ neoantigen therapies (ADXS-HOT)
Advaxis is creating a new group of immunotherapy constructs for major cancers that combines our optimized Lm
Technology vector with promising targets to generate potent anti-cancer immunity. The ADXS-HOT program is a series of novel
cancer immunotherapies that will target somatic mutations (“hotspots”), cancer testis antigens (“CTAs”) and oncofetal antigens
(“OFAs”). These three types of targets form the basis of the ADXS-HOT program because they are designed to be more capable
of generating potent, tumor specific, and high strength killer T cells, versus more traditional over-expressed native sequence
TAAs. Most hotspot mutations and OFA/CTA proteins play critical roles in oncogenesis; targeting both at once could significantly
impair cancer proliferation. The ADXS-HOT products will combine many of the potential high avidity targets that are expressed
in all patients with the target disease into one “off-the-shelf”, ready to administer treatment. The ADXS-HOT technology has a
strong Intellectual Property (“IP”) position, with potential protection into 2037, and an IP filing strategy providing for broad
coverage opportunities across multiple disease platforms and combination therapies.
In July 2018, the Company announced that the U.S. Food and Drug Administration (FDA) allowed the Company’s IND
application for its ADXS-HOT drug candidate for non-small cell lung cancer (NSCLC). Advaxis plans to have the first subject
enrolled in this Phase 1/2 study in early 2019 with an anticipated readout of safety, tolerability and immune correlative data from
the first cohort in the first half of 2019. Advaxis plans to file additional ADXS-HOT INDs in 2019, in prostate and bladder
cancers.
Prostate Cancer (ADXS-PSA)
According to the American Cancer Society, prostate cancer is the second most common type of cancer found in
American men and is the second leading cause of cancer death in men, behind only lung cancer. More than 160,000 men are
estimated to be diagnosed with prostate cancer in 2018, with approximately 30,000 deaths each year. Unfortunately, in about 10 –
20% of cases, men with prostate cancer will go on to develop castration-resistant prostate cancer (“CRPC”), which refers to
prostate cancer that progresses despite androgen deprivation therapy. Metastatic CRPC (“mCRPC”) occurs when the cancer
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spreads to other parts of the body and there is a rising prostate-specific antigen (“PSA”) level. This stage of prostate cancer has an
average survival of 9-13 months, is associated with deterioration in quality of life, and has few therapeutic options available.
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According to a data review published by MD Anderson Cancer Center in 2016, checkpoint inhibitor monotherapy has
not shown significant activity in mCRPC to date. The authors hypothesize that may be due to the inability of the checkpoint
inhibitor to infiltrate the tumor microenvironment, and that combination therapy with agents that induce T cell infiltration within
the tumor may improve performance of checkpoints in prostate cancer. Recent data from the Keynote-199 trial in bone
predominant-mCRCP patients treated with KEYTRUDA® (“pembrolizumab”) was presented at the 2018 ASCO Annual Meeting.
In this trial, only 4 out of 60 patients (7%) had decrease PSA post-baseline, with only 1 case that was ≥50%. The total SD/disease
stabilization rate was 37%.
Lm Technology constructs have been shown by multiple labs to reduce number and suppressive function of Tregs and
MDSCs in the tumor microenvironment and cause the destruction of Tregs in the TME as soon as five days after dosing in
models. This reduction of immune suppression in the tumors has been attributed to our proprietary tLLO -fusion peptides
expressed by multiple copies of the plasmids in each bacteria. Advaxis feels that the combination of ADXS-PSA, our
immunotherapy designed to target the PSA antigen, with a checkpoint inhibitor may provide an alternative treatment option for
patients with mCRPC. Clinical benefit in prostate cancer could be a significant value creator to expand the Lm Technology
platform into the prostate cancer market.
Advaxis has entered into a clinical trial collaboration and supply agreement with Merck to evaluate the safety and
efficacy of ADXS-PSA as monotherapy and in combination with KEYTRUDA® (“pembrolizumab”), Merck’s anti PD-1
antibody, in a Phase 1/2, open-label, multicenter, dose determination and expansion trial in patients with previously treated
metastatic, castration-resistant prostate cancer (Keynote-046). ADXS-PSA was tested alone or in combination with KEYTRUDA
in an advanced and heavily pretreated patient population who had progressed on androgen deprivation therapy. A total of 13 and
37 patients were evaluated on monotherapy and combination therapy, respectively. For the ADXS-PSA monotherapy dose
escalation and determination portion of the trial, cohorts were started at a dose of 1 x 109 cfu (n=7) and successfully escalated to
higher dose levels of 5x109 cfu (n=3) and 1x1010 cfu (n=3) without achieving a maximum tolerated dose. Treatment emergent
adverse events noted at these higher dose levels were generally consistent with those observed at the lower dose level (1 x 109
cfu) other than a higher occurrence rate of Grade 2/3 hypotension. The ADXS-PSA monotherapy dose-determination phase of the
trial has been completed. The Recommended Phase II Dose (RP2D) of ADXS-PSA monotherapy was determined to be 1x 109
cfu based on a review of the totality of the clinical data. This dose was used in combination with 200mg of pembrolizumab in a
cohort of six patients to evaluate the safety of the combination before moving into an expanded cohort of patients. The safety of
the combination was confirmed and enrollment in the expansion cohort phase was initiated. Enrollment in this phase of the trial (n
= 37) was completed in January 2017.
Updated data of this study in mCRPC patients treated with ADXS-PSA monotherapy (Part A) and in combination with
pembrolizumab (Part B) were presented at the American Society of Clinical Oncology (ASCO) Annual Meeting in June 2018. At
entry, Part A and Part B patients were similar in age (~70 yrs), Gleason score (~8.3), absence of visceral metastases (71% vs.
70%) and prior abiraterone use. Part B patients had higher median baseline PSA values (40.6 vs. 20.8 ng/ml), and more prior
enzalutamide (53% vs. 26%) and chemotherapy (49% vs. 36%) use versus Part A patients. A total of 49 patients (98%)
experienced treatment-related adverse events (TRAE), mainly chills, fever, nausea and hypotension. Five Part A and 13 Part B
patients had grade 3-4 events: fatigue, hypotension, hypertension, anemia. Treatment-related adverse events (TRAEs) were
mostly mild or moderate constitutional symptoms such as fever, chills, rigors, hypotension, nausea and fatigue, consistent with
immune activation and manageable with standard care. One patient in the monotherapy arm was discontinued from the study due
to a grade 4 TRAE related to cytokine release, which resolved within 24 hours using medical management. Overall, two Part A
(14%) v 16 Part B patients (43%) had a decreased PSA post-baseline. Of these, seven Part B (22%) versus 0 Part A patients
achieved a PSA reduction ≥50% from baseline. Part B patients had higher rates (56.8%) of stable disease/disease stabilization
than Part A patients (38.5%). Part B patients had higher rates (27%) of stable disease than monotherapy patients (7.7%). In all
treated patients, an improvement in survival was observed in Part B patients with ≥ 50% PSA declines from baseline versus those
with < 50% PSA declines. In conclusion, in this population of heavily pretreated mCRPC pts, ADXS-PSA + pembrolizumab had
a manageable safety profile (mostly grade 1-2 TRAEs) and showed a greater level of activity compared to monotherapy. The
Company anticipates providing an update on this study during the first quarter of 2019.
Other Lm Technology Products
HER2 Expressing Solid Tumors
HER2 is overexpressed in a percentage of solid tumors including osteosarcoma. According to published literature, up to
60% of osteosarcomas are HER2 positive, and this overexpression is associated with poor outcomes for patients. ADXS-HER2 is
an Lm Technology antigen delivery product candidate designed to target HER2 expressing solid tumors including human and
canine osteosarcoma. ADXS-HER2 has received FDA and EMA orphan drug designation for osteosarcoma and has received Fast
Track designation from the FDA for patients with newly-diagnosed, non-metastatic, surgically-resectable osteosarcoma.
In September 2018, the Company announced that it had granted a license to OS Therapies, LLC (“OS Therapies”) for
the use of ADXS31-164, also known as ADXS-HER2, for evaluation in the treatment of osteosarcoma in humans. Under the
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terms of the license agreement, OS Therapies, in collaboration with the Children’s Oncology Group (COG), will be responsible
for the conduct and funding of a clinical study evaluating ADXS-HER2 in recurrent, completely resected osteosarcoma. Pursuant
to the agreement, Advaxis is to receive an upfront payment, reimbursement for product supply and other support, clinical,
regulatory, and sales-based milestone payments, and royalties on future product sales. Additional details of the financial terms
have not been disclosed.
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Canine Osteosarcoma
On March 19, 2014, we entered into a definitive Exclusive License Agreement (the “Aratana Agreement”) with Aratana
Therapeutics, Inc. (“Aratana”), where we granted Aratana an exclusive, worldwide, royalty-bearing license, with the right to
sublicense, certain of our proprietary technology that enables Aratana to develop and commercialize animal health products that
will be targeted for treatment of osteosarcoma and other cancer indications in animals. A product license request was filed by
Aratana for ADXS-HER2 (also known as AT-014 by Aratana) for the treatment of canine osteosarcoma with the United States
Department of Agriculture (“USDA”). Aratana received communication in December 2017 that the USDA granted Aratana
conditional licensure for AT-014 for the treatment of dogs diagnosed with osteosarcoma, one year of age or older. Initially,
Aratana plans to make the therapeutic available for purchase at approximately two dozen veterinary oncology practice groups
across the United States who participate in the study. Aratana received communication in December 2017 that the USDA granted
Aratana conditional licensure for AT-014 for the treatment of dogs diagnosed with osteosarcoma, one year of age or older.
Aratana is currently conducting an extended field study which is a requirement for full USDA licensure. Initially, Aratana plans to
make the therapeutic available for purchase at approximately two dozen veterinary oncology practice groups across the United
States who participate in the study.
Under the terms of the Aratana Agreement, Aratana paid an upfront payment to Advaxis in the amount of $1,000,000
upon signing of the Aratana Agreement. Aratana will also pay Advaxis: (a) up to $36.5 million based on the achievement of
milestone relating to the advancement of products through the approval process with the USDA in the United States and the
relevant regulatory authorities in the European Union (“E.U.”) in all four therapeutic areas and up to an additional $15 million in
cumulative sales milestones based on achievement of gross sales revenue targets for sales of any and all products for use in non-
human animal health applications (the “Aratana Field”) (regardless of therapeutic area), and (b) tiered royalties starting at 5% and
going up to 10%, which will be paid based on net sales of any and all products (regardless of therapeutic area) in the Aratana
Field in the United States. Royalties for sales of products outside of the United States will be paid at a rate equal to half of the
royalty rate payable by Aratana on net sales of products in the United States (starting at 2.5% and going up to 5%). Royalties will
be payable on a product-by-product and country-by-country basis from first commercial sale of a product in a country until the
later of (a) the 10th anniversary of first commercial sale of such product by Aratana, its affiliates or sub licensees in such country
or (b) the expiration of the last-to-expire valid claim of our patents or joint patents claiming or covering the composition of
matter, formulation or method of use of such product in such country. Aratana will also pay us 50% of all sublicense royalties
received by Aratana and its affiliates. In fiscal year 2018, the Company received approximately $5,000 in royalty revenue from
Aratana.
Corporate Information
We were originally incorporated in the State of Colorado on June 5, 1987 under the name Great Expectations, Inc. We
were a publicly-traded “shell” company without any business until November 12, 2004 when we acquired Advaxis, Inc., a
Delaware corporation, through a Share Exchange and Reorganization Agreement, dated as of August 25, 2004, which we refer to
as the Share Exchange, by and among Advaxis, the stockholders of Advaxis and us. As a result of the Share Exchange, Advaxis
became our wholly-owned subsidiary and our sole operating company. On December 23, 2004, we amended and restated our
articles of incorporation and changed our name to Advaxis, Inc. On June 6, 2006, our stockholders approved the reincorporation
of our company from Colorado to Delaware by merging the Colorado entity into our wholly-owned Delaware subsidiary. Our
date of inception, for financial statement purposes, is March 1, 2002 and the Company was uplisted to NASDAQ in 2014.
Our principal executive offices and manufacturing facility is located at 305 College Road East, Princeton, New Jersey
08540 and our telephone number is (609) 452-9813. We maintain a corporate website at www.advaxis.com which contains
descriptions of our technology, our product candidates and the development status of each drug. We make available free of charge
through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K,
and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish
such material to, the SEC. We are not including the information on our website as a part of, nor incorporating it by reference into,
this report. You may read and copy any materials we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549 on official business days during the hours of 10:00 a.m. to 3:00 p.m. Please call the SEC at 1-800-SEC-0330 for
information on the Public Reference Room. Additionally, the SEC maintains a website that contains annual, quarterly, and current
reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website
address is http://www.sec.gov.
Intellectual Property
Protection of our intellectual property is important to our business. We have a robust and extensive patent portfolio that
protects our product candidates and Lm -based immunotherapy technology. Currently, we own or have rights to over 400 patents
and applications, which are owned, licensed from, or co-owned with University of Pennsylvania (“Penn”), Merck, National
Institute of Health (“NIH”), and/or Augusta University. We continuously grow this portfolio by filing new applications to protect
our ongoing research and development efforts. We aggressively prosecute and defend our patents and proprietary technology. Our
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patents and applications are directed to the compositions of matter, use, and methods thereof, of our Lm -LLO immunotherapies
for our product candidates, including axalimogene filolisbac, ADXS-PSA, ADXS-NEO, ADXS-HOT, ADXS-HER2.
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Our approach to the intellectual property portfolio is to create, maintain, protect, enforce and defend our proprietary
rights for the products we develop from our immunotherapy technology platform. We endeavor to maintain a coherent and
aggressive strategic approach to building our patent portfolio with an emphasis in the field of cancer vaccines. Issued patents
which are directed to axalimogene filolisbac, ADXS-PSA, and ADXS-HER2 in the United States, will expire between 2017 and
2032. Issued patents directed to our product candidates axalimogene filolisbac, ADXS-PSA, and ADXS-HER2 outside of the
United States, will expire in 2032. Issued patents directed to our Lm -based immunotherapy platform in the United States, will
expire between 2017 and 2031. Issued patents directed to our Lm -based immunotherapy platform outside of the United States,
will expire between 2018 and 2033.
We have pending patent applications directed to our product candidates axalimogene filolisbac, ADXS-PSA, ADXS-
HER2, ADXS-NEO and ADXS-HOT that, if issued would expire in the United States and in countries outside of the United
States between 2020 and 2037. We have pending patent applications directed to methods of using of our product candidates
axalimogene filolisbac, ADXS-DUAL, ADXS-PSA, ADXS-NEO, ADXS-HOT, ADXS-HER2 directed to the following
indications and others: HPV-related cervical cancer, prostate cancer and her2/neu-expressing cancer, that, if issued would expire
in the United States and in countries outside of the United States between 2020 and 2037, depending on the specific indications.
We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid
and enforceable patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element
of our business.
Our success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates,
technology, and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing
our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign
patent applications related to our proprietary technology, inventions, and improvements that are important to the development of
our business. We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to
develop and maintain our proprietary position.
Any patent applications which we have filed or will file or to which we have or will have license rights may not issue,
and patents that do issue may not contain commercially valuable claims. In addition, any patents issued to us or our licensors may
not afford meaningful protection for our products or technology, or may be subsequently circumvented, invalidated, narrowed, or
found unenforceable. Our processes and potential products may also conflict with patents which have been or may be granted to
competitors, academic institutions or others. As the pharmaceutical industry expands and more patents are issued, the risk
increases that our processes and potential products may give rise to interferences filed by others in the U.S. Patent and Trademark
Office, or to claims of patent infringement by other companies, institutions or individuals. These entities or persons could bring
legal actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the related
product or process. In recent years, several companies have been extremely aggressive in challenging patents covering
pharmaceutical products, and the challenges have often been successful. If any of these actions are successful, in addition to any
potential liability for damages, we could be required to cease the infringing activity or obtain a license in order to continue to
manufacture or market the relevant product or process. We may not prevail in any such action and any license required under any
such patent may not be made available on acceptable terms, if at all. Our failure to successfully defend a patent challenge or to
obtain a license to any technology that we may require to commercialize our technologies or potential products could have a
materially adverse effect on our business. In addition, changes in either patent laws or in interpretations of patent laws in the
United States and other countries may materially diminish the value of our intellectual property or narrow the scope of our patent
protection.
We also rely upon unpatented proprietary technology, and in the future may determine in some cases that our interests
would be better served by reliance on trade secrets or confidentiality agreements rather than patents or licenses. We may not be
able to protect our rights to such unpatented proprietary technology and others may independently develop substantially
equivalent technologies. If we are unable to obtain strong proprietary rights to our processes or products after obtaining regulatory
clearance, competitors may be able to market competing processes and products.
Others may obtain patents having claims which cover aspects of our products or processes which are necessary for, or
useful to, the development, use or manufacture of our services or products. Should any other group obtain patent protection with
respect to our discoveries, our commercialization of potential therapeutic products and methods could be limited or prohibited.
The Drug Development Process
The product candidates in our pipeline are at various stages of preclinical and clinical development. The path to
regulatory approval includes multiple phases of clinical trials in which we collect data that will ultimately support an application
to regulatory authorities to allow us to market a product for the treatment, of a specific type of cancer. There are many difficulties
and uncertainties inherent in research and development of new products, resulting in high costs and variable success rates.
Bringing a drug from discovery to regulatory approval, and ultimately to market, takes many years and significant costs.
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Clinical testing, known as clinical trials or clinical studies, is either conducted internally by pharmaceutical or
biotechnology companies or is managed on behalf of these companies by Clinical Research Organizations (“CRO”). The process
of conducting clinical studies is highly regulated by the FDA, as well as by other governmental and professional bodies. In a
clinical trial, participants receive specific interventions according to the research plan or protocol created by the study sponsor
and implemented by study investigators. Clinical trials may compare a new medical approach to a standard one that is already
available or to a placebo that contains no active ingredients or to no intervention. Some clinical trials compare interventions that
are already available to each other. When a new product or approach is being studied, it is not usually known whether it will be
helpful, harmful, or no different than available alternatives. The investigators try to determine the safety and efficacy of the
intervention by measuring certain clinical outcomes in the participants.
Phase 1. Phase 1 clinical trials begin when regulatory agencies allow initiation of clinical investigation of a new drug or
product candidate. They typically involve testing an investigational new drug on a limited number of patients. Phase 1
studies determine a drug’s basic safety, maximum tolerated dose and how the drug is absorbed by, and eliminated from,
the body. Typically, cancer therapies are initially tested on late-stage cancer patients.
Phase 2. Phase 2 clinical trials involve larger numbers of patients that have been diagnosed with the targeted disease or
condition. Phase 2 clinical trials gather preliminary data on effectiveness (where the drug works in people who have a
certain disease or condition) and to determine the common short-term side effects and risks associated with the drug. If
Phase 2 clinical trials show that an investigational new drug has an acceptable range of safety risks and probable
effectiveness, a company will continue to evaluate the investigational new drug in Phase 3 studies.
Phase 3. Phase 3 clinical trials are typically controlled multi-center trials that involve a larger number of patients to
ensure the study results are statistically significant. The purpose is to confirm effectiveness and safety on a large scale
and to provide an adequate basis for physician labeling. These trials are generally global in nature and are designed to
generate clinical data necessary to submit an application for marketing approval to regulatory agencies.
Biologic License Application (BLA). The results of the clinical trials using biologics are submitted to the FDA as part of
a BLA. Following the completion of Phase 3 studies, if the sponsor of a potential product in the United States believes it
has sufficient information to support the safety and effectiveness of the investigational new drug, the sponsor submits a
BLA to the FDA requesting that the investigational new drug be approved for marketing. The application is a
comprehensive filing that includes the results of all preclinical and clinical studies, information about the drug’s
composition, and the sponsor’s plans for manufacturing, packaging, labeling and testing the investigational new drug.
The FDA’s review of an application is designated either as a standard review with a target review time of 10 months or a
priority review with a target of 6 months. Depending upon the completeness of the application and the number and
complexity of follow-up requests and responses between the FDA and the sponsor, the review time can take months to
many years. Once approved through this process, a drug may be marketed in the United States, subject to any conditions
imposed by the FDA.
Government Regulations
General
Government authorities in the United States and other countries extensively regulate, among other things, the preclinical
and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and
distribution of drugs. In the United States, the FDA subjects drugs to rigorous review under the Federal Food, Drug and Cosmetic
Act, the Public Health Service Act and other federal statutes and regulations.
Orphan Drug Designation
Under the Orphan Drug Act (“ODA”), the FDA may grant Orphan Drug Designation (“ODD”) to a drug or biological
product intended to treat a rare disease or condition, which means a disease or condition that affects fewer than 200,000
individuals in the United States, or more than 200,000 individuals in the United States, but for which there is no reasonable
expectation that the cost of developing and making a drug or biological product available in the United States will be recovered
from domestic sales of the product.
The benefits of ODD can be substantial, including research and development tax credits and exemption from user fees,
enhanced access to advice from the FDA while the drug is being developed, and market exclusivity once the product reaches
approval and begins sales, provided that the new product is first to market and that this new product has not been previously
approved for the same orphan disease or condition, with or without orphan drug designation. In order to qualify for these
incentives, a company must apply for designation of its product as an “Orphan Drug” and obtain approval from the FDA. Orphan
product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process;
however, an ODD product may be eligible for priority review. A drug that is approved for the ODD indication is granted seven
years of orphan drug exclusivity. During that period, the FDA generally may not approve any other application for the same
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product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically
superior to the product with exclusivity.
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We currently have ODD with the FDA for axalimogene filolisbac for treatment of anal cancer (granted August 2013),
HPV-associated head and neck cancer (granted November 2013); and treatment of Stage II-IV invasive cervical cancer (granted
May 2014). We also have ODD with the FDA for ADXS-HER2 for the treatment of osteosarcoma (granted May 2014).
In Europe, the Committee for Orphan Medicinal Products (“COMP”) issued a positive opinion on the application for
ODD of axalimogene filolisbac for the treatment of anal cancer (December 2015) and on the application for ODD of ADXS-
HER2 for osteosarcoma (November 2015).
Expedited Programs for Serious Conditions
Four core FDA programs are intended to facilitate and expedite development and review of new drugs to address unmet
medical need in the treatment of serious or life-threatening conditions: fast track designation, breakthrough therapy designation,
accelerated approval, and priority review. We intend to avail ourselves of any and all of these programs as applicable to our
products.
Non-U.S. Regulation
Before our products can be marketed outside the United States, they are subject to regulatory approval of the respective
authorities in the country in which the product should be marketed. The requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product
in a country until an appropriate application has been approved by the regulatory authorities in that country. The time spent in
gaining approval varies from that required for FDA approval, and in certain countries, the sales price of a product must also be
approved. The pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory
authority, satisfactory prices might not be approved for such product.
Collaborations, Partnerships and Agreements
Collaborations, partnerships and agreements are a key component of Advaxis’ corporate strategy. As a late stage
biotechnology company without sales revenue, partnerships are an essential part of the ongoing strategy. Additionally, the
evolution of the field of immunotherapy has resulted in combination treatments becoming ubiquitous; ongoing clinical studies
and agreements with many of the leading, large oncology pharmaceutical companies helps validate that Lm Technology may play
a key role in the cancer treatment protocols of the future.
Our collaborators and partners include Merck, Aratana, OS Therapies, Biocon, Global BioPharma, Knight, and others.
For more information, see Note 9 to our financial statements.
We entered into an exclusive worldwide license agreement with Penn, on July 1, 2002 with respect to the innovative
work of Yvonne Paterson, Ph.D., Associate Dean for Research at the School of Nursing at Penn, and former Professor of
Microbiology at Penn, in the area of innate immunity, or the immune response attributed to immune cells, including dendritic
cells, macrophages and natural killer cells, that respond to pathogens non-specifically (subject to certain U.S. government rights).
This agreement was amended and restated as of February 13, 2007, and, thereafter, has been amended from time to time.
This license, unless sooner terminated in accordance with its terms, terminates upon the latter of (a) the expiration of the
last to expire of the Penn patent rights; or (b) twenty years after the effective date of the license. Penn may terminate the license
agreement early upon the occurrence of certain defaults by us, including, but not limited to, a material breach by us of the Penn
license agreement that is not cured within 60 days after notice of the breach is provided to us.
The license provides us with the exclusive commercial rights to the patent portfolio developed by Penn as of the
effective date of the license, in connection with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing
payments to commercialize the technology. In exchange for the license, Penn received shares of our Common Stock. However, as
of October 31, 2016, Penn does not own shares of our Common Stock. In addition, Penn is entitled to receive a non-refundable
initial license fee, royalty payments and milestone payments based on net sales and percentages of sublicense fees and certain
commercial milestones. Under the amended licensing agreement, Penn is entitled to receive 2.5% of net sales in the territory.
Should annual net sales exceed $250 million, the royalty rate will increase to 2.75%, but only with respect to those annual net
sales in excess of $250 million. Additionally, Penn will receive tiered sales milestone payments upon the achievement of
cumulative global sales ranging between $250 million and $2 billion, with the maximum aggregate amounts payable to Penn in
the event that maximum sales milestones are achieved is $40 million. Notwithstanding these royalty rates, upon first in-human
commercial sale (U.S. & E.U.), we have agreed to pay Penn a total of $775,000 over a four-year period as an advance minimum
royalty, which shall serve as an advance royalty in conjunction with the above terms. In addition, under the license, we are
obligated to pay an annual maintenance fee of $100,000 commencing on December 31, 2010, and each December 31st thereafter
for the remainder of the term of the agreement until the first commercial sale of a Penn licensed product. We are responsible for
filing new patents and maintaining and defending the existing patents licensed to us and we are obligated to reimburse Penn for
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all attorney’s fees, expenses, official fees and other charges incurred in the preparation, prosecution and maintenance of the
patents licensed from Penn.
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Upon first regulatory approval in humans (US or EU), Penn will be entitled to a milestone payment of $600,000.
Furthermore, upon the achievement of the first sale of a product in certain fields, Penn will be entitled to certain milestone
payments, as follows: $2.5 million will be due upon the first in-human commercial sale (US or EU) of the first product in the
cancer field and $1.0 million will be due upon the date of first in-human commercial sale (US or EU) of a product in each of the
secondary strategic fields sold.
Manufacturing
Current Good Manufacturing Practices (“cGMPs”) are the standards identified to conform to requirements by
governmental agencies that control authorization and licensure for manufacture and distribution of drug products for either
clinical investigations or commercial sale. GMPs identify the requirements for procurement, manufacturing, testing, storage,
distribution and the supporting quality systems to ensure that a drug product is safe for its intended application. cGMPs are
enforced in the United States by the FDA, under the authorities of the Federal Food, Drug and Cosmetic Act and its implementing
regulations and use the phrase “current good manufacturing practices” (“cGMP”) to describe these standards.
Each of Advaxis’ wholly owned product candidates is manufactured using a platform process, with uniform methods and
testing procedures. This allows for an accelerated pathway from construct discovery to clinical product delivery, while helping to
keep cost of goods low. The Company intends to add new constructs to this standardized manufacturing process as its pipeline
evolves.
Advaxis has entered into agreements with multiple third-party organizations (“CMOs”) to handle the manufacturing,
testing, and distribution of product candidates. These organizations have extensive experience within the biologics space and with
the production of clinical and commercial GMP supplies.
In parallel, the Company has also continued to invest in internal process/analytical development, quality systems,
manufacturing, and quality control infrastructure with the goal of accelerating and advancing our pipeline. Advaxis has
constructed a state-of-the-art manufacturing facility and laboratory to develop and manufacture clinical-grade products,
supporting the clinical trials and future commercialization of the Company’s therapeutics. Increased manufacturing capability and
capacity allows Advaxis to manufacture its own material and reduce reliance on CMOs, and improve supply flexibility,
scalability, lead times, and costs of goods. The Company’s long-term manufacturing strategy is to leverage both their partners’
capabilities and their internal capabilities in order to build a supply chain that is reliable, flexible, and cost competitive.
Competition
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high
degree of competition. As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion
of our related research and development expenses. While we believe that our product candidates, technology, knowledge and
experience provide us with competitive advantages, we face competition from established and emerging pharmaceutical and
biotechnology companies, among others. The biotechnology and biopharmaceutical industries are highly competitive, and this
competition comes from both biotechnology firms and from major pharmaceutical companies, including: Aduro, BioNtech,
Moderna, Gritstone, BMS, Inovio Pharmaceutical Inc., ISA Pharmaceuticals, AstraZeneca, Merck, Neon Therapeutics,
Oncolytics Biotech Inc., Oncothyreon Inc., et al., each of which is pursuing cancer vaccines and/or immunotherapies.
Many of these companies have substantially greater financial, marketing, and human resources than we do (including, in
some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We
also experience competition in the development of our immunotherapies from universities and other research institutions and
compete with others in acquiring technology from such universities and institutions. In addition, certain of our immunotherapies
may be subject to competition from investigational new drugs and/or products developed using other technologies, some of which
have completed numerous clinical trials.
Our competition will be determined in part by the potential indications for which drugs are developed and ultimately
approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential immunotherapies or
of competitors’ products may be an important competitive factor. Accordingly, the speed with which we can develop
immunotherapies, complete preclinical testing, clinical trials and approval processes and supply commercial quantities to market
are expected to be important competitive factors. We expect that competition among products approved for sale will be based on
various factors, including product efficacy, safety, administration, reliability, acceptance, availability, price and patent position.
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Experience and Expertise
Our management team has extensive experience in oncology development, including contract research, development,
manufacturing and commercialization across a board range of science, technologies, and process operations. We have built
internal capabilities supporting research, clinical, medical, manufacturing and compliance operations and have extended our
expertise with collaborations.
Employees
As of October 31, 2018, we had 58 employees, all of which were full time employees, 48 of whom were engaged in
research and development activities and 10 of whom were engaged in finance, business development, facilities, human resources
and administrative support. Of our full-time employees, 16 hold Ph.D. degrees. None of our employees are represented by a labor
union, and we consider our relationship with our employees to be good.
We will continue to rent necessary offices and laboratories to support our business.
Item 1A: Risk Factors.
You should carefully consider the risks described below as well as other information provided to you in this annual
report, including information in the section of this document entitled “Forward-Looking Statements.” The risks and uncertainties
described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently
believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely affected, the value of our common stock could decline,
and you may lose all or part of your investment.
Risks Related to Our Business, Industry and Strategy
We are a clinical stage company.
We are a clinical stage biotechnology company with a history of losses and can provide no assurance as to future
operating results. As a result of losses that will continue throughout our clinical stage, we may exhaust our financial resources and
be unable to complete the development of our products. We anticipate that our ongoing operational costs will increase
significantly as we continue conducting our clinical development program. Our deficit will continue to grow during our drug
development period.
We have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the
foreseeable future due to our substantial investment in research and development. As of October 31, 2018, we had an accumulated
deficit of approximately $367.7 million and stockholders’ equity of approximately $24.1 million. We expect to spend substantial
additional sums on the continued administration and research and development of proprietary products and technologies with no
certainty that our immunotherapies will become commercially viable or profitable as a result of these expenditures. If we fail to
raise a significant amount of capital, we may need to significantly curtail operations or cease operations in the near future. If any
of our product candidates fail in clinical trials or does not gain regulatory approval, we may never become profitable. Even if we
achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
The successful development of immunotherapies is highly uncertain.
Successful development of immunotherapies is highly uncertain and is dependent on numerous factors, many of which
are beyond our control. Immunotherapies that appear promising in the early phases of development may fail to reach the market
for several reasons including:
● preclinical study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet
its primary objectives) or to have harmful or problematic side effects;
● clinical study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet
its primary endpoint) or to have unacceptable side effects;
● failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such
delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time
requirements for data analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request
for additional preclinical or clinical data, or unexpected safety or manufacturing issues;
● manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy
uneconomical; and
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● the proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from
being commercialized.
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Success in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful.
Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The
length of time necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one immunotherapy to the next and may be difficult to predict.
We are limited in our manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We currently have agreements with third party manufacturing facilities for production of many of our immunotherapies
for research and development and testing purposes. While we have built our own manufacturing facility onsite in Princeton, New
Jersey to manufacture clinical materials for some of our products, including ADXS-NEO, we depend on third-party
manufacturers to supply most of our preclinical and clinical materials and will be reliant on a third-party manufacturer to produce
axalimogene filolisbac on a commercial scale, should that product receive regulatory approval. Third-party manufacturers must
be able to meet our deadlines as well as adhere to quality standards and specifications. Our predominant reliance on third parties
for the manufacture of our drug substance, investigational new drugs and, in the future, any approved products, creates a
dependency that could severely disrupt our research and development, our clinical testing, and ultimately our sales and marketing
efforts if the source of such supply proves to be unreliable or unavailable. If our own manufacturing operation or any contracted
manufacturing operation is unreliable or unavailable, we may not be able to manufacture clinical drug supplies of our
immunotherapies, and our preclinical and clinical testing programs may not be able to move forward and our entire business plan
could fail. If we are able to commercialize our products in the future, there is no assurance that our own manufacturing operation
or any third-party manufacturers will be able to meet commercialized scale production requirements in a timely manner or in
accordance with applicable standards or current GMP.
If we are unable to establish, manage or maintain strategic collaborations in the future, our revenue and drug development
may be limited.
Our strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of
our clinical product candidates, and we may rely even more on strategic collaborations for research, development, marketing and
commercialization for some of our immunotherapies. To date, we have been heavily reliant upon third party outsourcing for our
clinical trials execution and production of drug supplies for use in clinical trials. Establishing strategic collaborations is difficult
and time-consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations on
favorable terms, if at all. For example, potential collaborators may reject collaborations based upon their assessment of our
financial, clinical, regulatory or intellectual property position. Our current collaborations, as well as any future new
collaborations, may never result in the successful development or commercialization of our immunotherapies or the generation of
sales revenue. To the extent that we have entered or will enter into co-promotion or other collaborative arrangements, our product
revenues are likely to be lower than if we directly marketed and sold any products that we may develop.
Management of our relationships with our collaborators will require:
● significant time and effort from our management team;
● financial funding to support said collaboration;
● coordination of our research and development programs with the research and development priorities of our
collaborators; and
● effective allocation of our resources to multiple projects.
If we continue to enter into research and development collaborations at the early phases of drug development, our
success will in part depend on the performance of our corporate collaborators. We will not directly control the amount or timing
of resources devoted by our corporate collaborators to activities related to our immunotherapies and our collaborations may
terminate at any time. Our corporate collaborators may not commit sufficient resources to our research and development
programs or the commercialization, marketing or distribution of our immunotherapies. If any corporate collaborator fails to
commit sufficient resources or terminate their collaborations with us, our preclinical or clinical development programs related to
this collaboration could be delayed or terminated. For example, we had entered into a License and Collaboration Agreement,
dated as of August 1, 2016 (the “Amgen Agreement”) pertaining to the development and commercialization of our ADXS-NEO
program, whereby Amgen received an exclusive worldwide license to develop and commercialize the ADXS-NEO program and
we and Amgen collaborated through a joint steering committee for the development and commercialization of ADXS-NEO and
Amgen reimbursed us for certain research and development costs in support of the ADXS-NEO program. On December 10, 2018,
we received a written termination notice from Amgen with respect to the Amgen Agreement. We will evaluate whether to re-
partner the ADXS-NEO program, but the loss of the Amgen Agreement, could have an impact on our ability to timely complete
our ADXS-NEO study and on our financial condition and results of operations.
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Further, our collaborators may pursue existing or other development-stage products or alternative technologies in
preference to those being developed in collaboration with us. Finally, if we fail to make required milestone or royalty payments to
our collaborators or to observe other obligations in our agreements with them, our collaborators may have the right to terminate
those agreements.
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We may incur significant costs complying with environmental laws and regulations.
We and our contracted third parties use hazardous materials, including chemicals and biological agents and compounds
that could be dangerous to human health and safety or the environment. As appropriate, we store these materials and wastes
resulting from their use at our or our outsourced laboratory facility pending their ultimate use or disposal. We contract with a third
party to properly dispose of these materials and wastes. We are subject to a variety of federal, state and local laws and regulations
governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with such
laws and regulations may be costly.
If we use biological materials in a manner that causes injury, we may be liable for damages.
Our research and development activities involve the use of biological and hazardous materials. Although we believe our
safety procedures for handling and disposing of these materials complies with federal, state and local laws and regulations, we
cannot entirely eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these
materials. We do not carry specific biological waste or pollution liability or remediation insurance coverage, nor do our workers’
compensation, general liability, and property and casualty insurance policies provide coverage for damages and fines/penalties
arising from biological exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable
for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be
suspended or terminated.
We need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited
resources.
As of October 31, 2018, we had 58 employees, all of which were full time employees. Our ability to attract and retain
highly skilled personnel is critical to our operations and expansion. We face competition for these types of personnel from other
technology companies and more established organizations, many of which have significantly larger operations and greater
financial, technical, human and other resources than we have. We may not be successful in attracting and retaining qualified
personnel on a timely basis, on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, or
integrating them into our operations, our business, prospects, financial condition and results of operations will be materially
adversely affected. In such circumstances we may be unable to conduct certain research and development programs, unable to
adequately manage our clinical trials and other products, unable to commercialize any products, and unable to adequately address
our management needs.
We depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive
disadvantage.
We depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants. The
loss or unavailability of the services of any of these individuals for any significant period of time could have a material adverse
effect on our business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the
beneficiary of, key-person life insurance.
The biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of
competition. We may be unable to compete with more substantial enterprises.
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high
degree of competition. As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion
of our related research and development and commercialization expenses. Competition in the biopharmaceutical industry is based
significantly on scientific and technological factors. These factors include the availability of patent and other protection for
technology and products, the ability to commercialize technological developments and the ability to obtain governmental
approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the United States,
Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their
operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including
cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made
commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions and
governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified
scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital to us.
We are aware of certain investigational new drugs under development or approved products by competitors that are used
for the prevention, diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are
developing biopharmaceutical products that have the potential to directly compete with our immunotherapies even though their
approach to may be different. The biotechnology and biopharmaceutical industries are highly competitive, and this competition
comes from both biotechnology firms and from major pharmaceutical companies, including companies like: Gritstone, Moderna,
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Aduro Biotech, Agenus Inc., Inovio Pharmaceutical Inc., ISA Pharmaceuticals, BMS, Merck, Neon Therapeutics, Oncolytics
Biotech Inc. and Oncothyreon Inc., among others, each of which is pursuing cancer vaccines and/or immunotherapies. Many of
these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases,
substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience
competition in the development of our immunotherapies from universities and other research institutions and compete with others
in acquiring technology from such universities and institutions.
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In addition, certain of our immunotherapies may be subject to competition from investigational new drugs and/or
products developed using other technologies, some of which have completed numerous clinical trials.
Risks Related to the Development and Regulatory Approval of Our Product Candidates
Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate
of failure.
Product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy
in humans. Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming and expensive process that takes many
years. We cannot be sure that pre-clinical testing or clinical trials of any of our product candidates will demonstrate the safety,
efficacy and benefit-to-risk profile necessary to obtain marketing approvals. In addition, product candidates that experience
success in pre-clinical testing and early-stage clinical trials will not necessarily experience the same success in larger or late-stage
clinical trials, which are required for marketing approval.
Even if we are successful in advancing a product candidate into the clinical development stage, before obtaining
regulatory and marketing approvals, we must demonstrate through extensive human clinical trials that the product candidate is
safe and effective for its intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory
authorities and to the independent committees responsible for the ethical review of clinical studies. There may be delays in
preparing protocols or receiving approval for them that may delay the start or completion of the clinical trials. In addition, clinical
practices vary globally, and there is a lack of harmonization among the guidance provided by various regulatory bodies of
different regions and countries with respect to the data that is required to receive marketing approval, which makes designing
global trials increasingly complex. There are a number of additional factors that may cause our clinical trials to be delayed,
prematurely terminated or deemed inadequate to support regulatory approval, such as:
● safety issues up to and including patient death (whether arising with respect to trials by third parties for compounds in a
similar class as tour product or product candidate), inadequate efficacy, or an unacceptable risk-benefit profile observed
at any point during or after completion of the trials;
● slower than expected rates of patient enrollment, which could be due to any number of factors, including failure of our
third-party vendors, including our CROs, to effectively perform their obligations to us, a lack of patients who meet the
enrollment criteria or competition from clinical trials in similar product classes or patient populations, or onerous
treatment administration requirements;
● the risk of failure of our clinical investigational sites and related facilities, including our suppliers, to maintain
compliance with the FDA’s cGMP regulations or similar regulations in countries outside of the U.S., including the risk
that these sites fail to pass inspections by the appropriate governmental authority, which could invalidate the data
collected at that site or place the entire clinical trial at risk;
● any inability to reach agreement or lengthy discussions with the FDA, equivalent regulatory authorities, or ethical review
committees on trial design that we are able to execute;
● changes in laws, regulations, regulatory policy or clinical practices, especially if they occur during ongoing clinical trials
or shortly after completion of such trials; and
● clinical trial record keeping or data quality and accuracy issues.
Any deficiency in the design, implementation or oversight of our development programs could cause us to incur
significant additional costs, conduct additional trials, experience significant delays, prevent us from obtaining marketing approval
for any product candidate or abandon development of certain product candidates, any of which could harm our business and cause
our stock price to decline.
We may face legal claims; litigation is expensive and we may not be able to afford the costs.
We may face legal claims involving stockholders, consumers, competitors, regulators and other parties. As described in
“Legal Proceedings” in Part I Item 3 of this Form 10-K, we are engaged in legal proceedings. Litigation and other legal
proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us
from engaging in business practices, or requiring other remedies, such as compulsory licensing of patents.
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The costs of litigation or any proceeding relating to our intellectual property or contractual rights could be substantial,
even if resolved in our favor. Some of our competitors or financial funding sources have far greater resources than we do and may
be better able to afford the costs of complex litigation. Also, a lawsuit, even if frivolous, will require considerable time
commitments on the part of management, our attorneys and consultants. Defending these types of proceedings or legal actions
involve considerable expense and could negatively affect our financial results.
We can provide no assurance of the successful and timely development of new products.
Our immunotherapies are at various stages of research and development. Further development and extensive testing will
be required to determine their technical feasibility and commercial viability. We will need to complete significant additional
clinical trials demonstrating that our product candidates are safe and effective to the satisfaction of the FDA and other non-U.S.
regulatory authorities. The drug approval process is time-consuming, involves substantial expenditures of resources, and depends
upon a number of factors, including the severity of the illness in question, the availability of alternative treatments, and the risks
and benefits demonstrated in the clinical trials. Our success will depend on our ability to achieve scientific and technological
advances and to translate such advances into licensable, FDA-approvable, commercially competitive products on a timely basis.
Failure can occur at any stage of the process. If such programs are not successful, we may invest substantial amounts of time and
money without developing revenue-producing products. As we enter a more extensive clinical program for our product
candidates, the data generated in these studies may not be as compelling as the earlier results.
The proposed development schedules for our immunotherapies may be affected by a variety of factors, including
technological difficulties, clinical trial failures, regulatory hurdles, clinical holds, competitive products, intellectual property
challenges and/or changes in governmental regulation, many of which will not be within our control. Any delay in the
development, introduction or marketing of our products could result either in such products being marketed at a time when their
cost and performance characteristics would not be competitive in the marketplace or in the shortening of their commercial lives.
In light of the long-term nature of our projects, the unproven technology involved and the other factors described elsewhere in
this section, there can be no assurance that we will be able to successfully complete the development or marketing of any new
products which could materially harm our business, results of operations and prospects.
Our research and development expenses are subject to uncertainty.
Factors affecting our research and development expenses include, but are not limited to:
● competition from companies that have substantially greater assets and financial resources than we have;
● need for acceptance of our immunotherapies;
● ability to anticipate and adapt to a competitive market and rapid technological developments;
● ability to raise sufficient capital to fund our research and development activities;
● amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and
infrastructure;
● need to rely on multiple levels of outside funding due to the length of drug development cycles and governmental
approved protocols associated with the pharmaceutical industry; and
● dependence upon key personnel including key independent consultants and advisors.
There can be no guarantee that our research and development expenses will be consistent from period to period. We may
be required to accelerate or delay incurring certain expenses depending on the results of our studies and the availability of
adequate funding.
We may be required to suspend or discontinue clinical trials for a number of reasons, which could preclude approval of any of
our product candidates.
Our clinical trials may be suspended at any time for a number of reasons. A clinical trial may be suspended or terminated by
us, an IRB, the FDA or other regulatory authorities due to a failure to conduct the clinical trial in accordance with regulatory
requirements or our clinical protocols, presentation or identification of unforeseen safety signals or issues, failure to demonstrate
a benefit from using the investigational drug, changes in governmental regulations or administrative actions, lack of adequate
funding to continue the clinical trial, or for other business-related reasons. In addition, clinical trials for our product candidates
could be suspended due to adverse side effects. Drug-related side effects could affect patient recruitment or the ability of enrolled
patients to complete the trial or result in potential product liability claims. We may also voluntarily suspend or terminate our
clinical trials if at any time we believe that they present an unacceptable risk to patients or do not demonstrate clinical benefit. If
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we elect or are forced to suspend or terminate any clinical trial of any product candidates that we develop, the commercial
prospects of such product candidates will be harmed and our ability to generate product revenues from any of these product
candidates will be delayed or eliminated. Any of these occurrences may significantly harm our business, financial condition,
results of operations and prospects.
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Preliminary or interim results of a clinical trial are not necessarily predictive of future or final results.
Interim or preliminary data from clinical trials that we may conduct may not be indicative of the final results of the trial and
are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more
patient data become available. Interim or preliminary data also remain subject to audit and verification procedures that may result
in the final data being materially different from the interim or preliminary data. As a result, interim or preliminary data should be
viewed with caution until the final data are available. Even if our clinical trials are completed as planned, we cannot be certain
that their results will support our proposed indications.
We are subject to numerous risks inherent in conducting clinical trials.
We outsource the management of our clinical trials to third parties. Agreements with clinical research organizations,
clinical investigators and medical institutions for clinical testing and data management services, place substantial responsibilities
on these parties that, if unmet, could result in delays in, or termination of, our clinical trials. For example, if any of our clinical
trial sites fail to comply with FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If
these clinical investigators, medical institutions or other third parties do not carry out their contractual duties or regulatory
obligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to
their failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated, and
we may be unable to obtain regulatory approval for, or successfully commercialize, our agents. We are not certain that we will
successfully recruit enough patients to complete our clinical trials nor that we will reach our primary endpoints. Delays in
recruitment, lack of clinical benefit or unacceptable side effects would delay or prevent the initiation of future development of our
agents.
We or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or
terminate our clinical trials if at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials
or do not demonstrate clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation of
our clinical trials, or place our products on temporary or permanent hold, at any time if they believe that the clinical trials are not
being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the
patients enrolled in our clinical trials.
Our clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or
our clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive
reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate or are dissatisfied with the corrective actions we or our clinical trial sites
have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may be criminally prosecuted.
The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to
obtain regulatory approval for our product candidates, which would materially harm our business, results of operations and
prospects.
We must comply with significant government regulations.
The research and development, manufacturing and marketing of human therapeutic and diagnostic products are subject
to regulation, primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies
and other federal, state, local and foreign entities regulate, among other things, research and development activities (including
testing in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval,
advertising and promotion of the products that we are developing. If we obtain approval for any of our product candidates, our
operations will be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statue and the federal False Claims Act, and privacy laws.
Noncompliance with applicable laws and requirements can result in various adverse consequences, including delay in approving
or refusal to approve product licenses or other applications, suspension or termination of clinical investigations, revocation of
approvals previously granted, fines, criminal prosecution, civil and criminal penalties, recall or seizure of products, exclusion
from having our products reimbursed by federal health care programs, the curtailment or restructuring of our operations,
injunctions against shipping products and total or partial suspension of production and/or refusal to allow a company to enter into
governmental supply contracts.
The process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA
requirements for a new human biological product to be marketed in the United States include: (1) the successful conclusion of
preclinical laboratory and animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the
FDA of an IND to conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-
controlled human clinical trials to establish the safety and efficacy of the investigational new drug for its recommended use; and
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(4) filing by a company and acceptance and approval by the FDA of a BLA for marketing approval of a biologic, to allow
commercial distribution of a biologic product. The FDA also requires that any drug or formulation to be tested in humans be
manufactured in accordance with its cGMP regulations. This has been extended to include any drug that will be tested for safety
in animals in support of human testing. The cGMPs set certain minimum requirements for procedures, record-keeping and the
physical characteristics of the laboratories used in the production of these drugs. A delay in one or more of the procedural steps
outlined above could be harmful to us in terms of getting our immunotherapies through clinical testing and to market.
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We can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
We are currently evaluating the safety and efficacy of several of our candidates in a number of ongoing pre-clinical and
clinical trials. However, even though the initiation and conduct of the clinical trials is in accordance with the governing regulatory
authorities in each country, as with any investigational new drug (under an IND in the United States, or the equivalent in countries
outside of the United States), we are at risk of a clinical hold at any time based on the evaluation of the data and information
submitted to the governing regulatory authorities.
There can be delays in obtaining U.S FDA and/or other necessary regulatory approvals in the United States and in
countries outside the United States for any investigational new drug and failure to receive such approvals would have an adverse
effect on the investigational new drug’s potential commercial success and on our business, prospects, financial condition and
results of operations. The time required to obtain approval by the FDA and non-U.S. regulatory authorities is unpredictable but
typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the
substantial discretion of the regulatory authorities. For example, the FDA or non-U.S. regulatory authorities may disagree with
the design or implementation of our clinical trials or study endpoints; or we may be unable to demonstrate that a product
candidate’s clinical and other benefits outweigh its safety risks. In addition, the FDA or non-U.S. regulatory authorities may
disagree with our interpretation of data from preclinical studies or clinical trials or the data collected from clinical trials of our
product candidates may not be sufficient to support the submission of a BLA or New Drug Application (“NDA”) or other
submission or to obtain regulatory approval in the United States or elsewhere. The FDA or non-U.S. regulatory authorities may
fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and
commercial supplies; and the approval policies or regulations of the FDA or non-U.S. regulatory authorities may significantly
change in a manner rendering our clinical data insufficient for approval.
In addition to the foregoing, approval policies, regulations, or the type and amount of clinical data necessary to gain
approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have
not submitted for nor obtained regulatory approval for any product candidate in-humans (US & EU) and it is possible that none of
our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory
approval.
We may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.
Although we have been granted FDA orphan drug designation for axalimogene filolisbac for use in the treatment of anal
cancer, HPV-associated head and neck cancer, Stage II-IV invasive cervical cancer and for ADXS-HER2 for the treatment of
osteosarcoma in the United States, as well as EMA orphan drug designation for axalimogene filolisbac for the treatment of anal
cancer and for ADXS-HER2 for the treatment of osteosarcoma in the EU, and intend to continue to expand our designation for
these uses where applicable, we may not receive the benefits associated with orphan drug designation. This may result from a
failure to maintain orphan drug status or result from a competing product reaching the market that has an orphan designation for
the same disease indication. Under U.S. rules for orphan drugs, if such a competing product reaches the market before ours does,
the competing product could potentially obtain a scope of market exclusivity that limits or precludes our product from being sold
in the United States for seven years. Even if we obtain exclusivity, the FDA could subsequently approve the same drug for the
same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or
makes a major contribution to patient care. A competitor also may receive approval of different products for the same indication
for which our orphan product has exclusivity or obtain approval for the same product but for a different indication for which the
orphan product has exclusivity.
In addition, if and when we request orphan drug designation in Europe, the European exclusivity period is ten years but
can be reduced to six years if the drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently
profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMEA determines
that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug
to meet the needs of patients with the rare disease or condition.
We may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.
We face an inherent risk of product liability exposure related to the testing of our immunotherapies in human clinical
trials and will face an even greater risk if the approved products are sold commercially. An individual may bring a liability claim
against us if one of the immunotherapies causes, or merely appears to have caused, an injury. If we cannot successfully defend
ourselves against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
● decreased demand for our immunotherapies;
● damage to our reputation;
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● withdrawal of clinical trial participants;
● costs of related litigation;
● substantial monetary awards to patients or other claimants;
● loss of revenues;
● the inability to commercialize immunotherapies; and
● increased difficulty in raising required additional funds in the private and public capital markets.
We have Product Liability and Clinical Trial Liability insurance coverage for each clinical trial. We do not have product
liability insurance for sold commercial products because we do not have products on the market. We currently are in the process
of obtaining insurance coverage and plan to expand such coverage to include the sale of commercial products if marketing
approval is obtained for any of our immunotherapies. However, insurance coverage is increasingly expensive and we may not be
able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be
adequate to satisfy any liability that may arise.
We may not obtain or maintain the benefits associated with breakthrough therapy designation.
If we apply for Breakthrough Therapy Designation (“BTD”), we may not be granted BTD, or even if granted, we may
not receive the benefits associated with BTD. This may result from a failure to maintain breakthrough therapy status if it is no
longer considered to be a breakthrough therapy. For example, a drug’s development program may be granted BTD using early
clinical testing that shows a much higher response rate than available therapies. However, subsequent interim data derived from a
larger study may show a response that is substantially smaller than the response seen in early clinical testing. Another example is
where BTD is granted to two drugs that are being developed for the same use. If one of the two drugs gains traditional approval,
the other would not retain its designation unless its sponsor provided evidence that the drug may demonstrate substantial
improvement over the recently approved drug. When BTD is no longer supported by emerging data or the designated drug
development program is no longer being pursued, the FDA may choose to send a letter notifying the sponsor that the program is
no longer designated as a breakthrough therapy development program.
We believe that our immunotherapies under development and in clinical trials will address unmet medical needs in the
treatment of cancer. Our competition will be determined in part by the potential indications for which drugs are developed and
ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or
of competitors’ products may be an important competitive factor. Accordingly, the relative speed with which we can develop
immunotherapies, complete preclinical testing, clinical trials and approval processes and supply commercial quantities to market
is expected to be important competitive factors. We expect that competition among products approved for sale will be based on
various factors, including product efficacy, safety, reliability, availability, price and patent position.
Approval of our product candidates does not ensure successful commercialization and reimbursement.
We are not currently marketing our product candidates; however, we are seeking commercial opportunities for
axalimogene filolisbac. We cannot assure you that we will be able to commercialize it or any other candidate ourselves or find a
commercialization partner or that we will be able to agree to acceptable terms with any partner to launch and commercialize our
products.
The commercial success of our product candidates is subject to risks in both the United States and European countries. In
addition, in European countries, pricing and payment of prescription pharmaceuticals is subject to more extensive governmental
control than in the United States. Pricing negotiations with European governmental authorities can take six to 12 months or longer
after the receipt of regulatory approval and product launch. If reimbursement is unavailable in any country in which
reimbursement is sought, limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our ability or any
potential partner’s ability to successfully commercialize in such a country would be impacted negatively. Furthermore, if these
measures prevent us or any potential partner from selling on a profitable basis in a particular country, they could prevent the
commercial launch or continued sale in that country and could adversely impact the commercialization market opportunity in
other countries.
Moreover, as a condition of approval, the regulatory authorities may require that we conduct post-approval studies.
Those studies may reveal new safety or efficacy findings regarding our drug that could adversely impact the continued
commercialization or future market opportunity in other countries.
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In addition, we predominantly rely on a network of suppliers and vendors to manufacture our products. Should a
regulatory authority make any significant findings on an inspection of our own operations or the operations of those companies,
the ability for us to continue producing our products could be adversely impacted and further production could cease. Regulatory
GMP requirements are extensive and can present a risk of injury or recall, among other risks, if not manufactured or labeled
properly under GMPs.
Our potential revenues from the commercialization of our product candidates are subject to these and other factors, and
therefore we may never reach or maintain profitability.
Even if we are successful in obtaining market approval, commercial success of any of our product candidates will also
depend in large part on the availability of coverage and adequate reimbursement from third-party payers, including government
payers such as the Medicare and Medicaid programs and managed care organizations, which may be affected by existing and
future health care reform measures designed to reduce the cost of health care. Third-party payers could require us to conduct
additional studies, including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement,
which could be costly and divert our resources. If government and other health care payers were not to provide adequate coverage
and reimbursement levels for one any of our products once approved, market acceptance and commercial success would be
reduced.
In addition, if one of our products is approved for marketing, we will be subject to significant regulatory obligations
regarding product promotion, the submission of safety and other post-marketing information and reports and registration, and will
need to continue to comply (or ensure that our third party providers comply) with cGMPs, and Good Clinical Practices (“GCP”),
for any clinical trials that we conduct post-approval. In addition, there is always the risk that we or a regulatory authority might
identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or
frequency. Compliance with these requirements is costly, and any failure to comply or other issues with our product candidates’
post-market approval could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to our Intellectual Property
We rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be
liable for infringing the intellectual property rights of others.
Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies,
including the Lm-LLO based immunotherapy platform technology, and the proprietary technology of others with whom we have
entered into collaboration and licensing agreements.
Currently, we own or have rights to approximately 433 patents and applications, which are owned, licensed from, or co-
owned with Penn, Merck, NIH, and/or Augusta University. We have obtained the rights to all future patent applications in this
field originating in the laboratories of Dr. Yvonne Paterson and Dr. Fred Frankel, at the University of Pennsylvania.
We own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents
and foreign counterparts. Our success depends in part on our ability to obtain patent protection both in the United States and in
other countries for our product candidates, as well as the methods for treating patients in the product indications using these
product candidates. Such patent protection is costly to obtain and maintain, and we cannot guarantee that sufficient funds will be
available. Our ability to protect our product candidates from unauthorized or infringing use by third parties depends in substantial
part on our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the
patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these
patents, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if
our product candidates, as well as methods for treating patients for prescribed indications using these product candidates are
covered by valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the
patents will provide protection only for a limited amount of time. Accordingly, rights under any issued patents may not provide us
with sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against
competitive products or processes.
In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or
licensed to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or
enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable
to us. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States
and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.
Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries offer
different degrees of protection against use of the patented invention by others. If we encounter such difficulties in protecting or
are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects
could be substantially harmed.
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The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex
legal and factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be
challenged, deemed unenforceable, invalidated, or circumvented as a result of laws, rules and guidelines that are changed due to
legislative, judicial or administrative actions, or review, which render our patents unenforceable or invalid. Our patents can be
challenged by our competitors who can argue that our patents are invalid, unenforceable, lack utility, sufficient written description
or enablement, or that the claims of the issued patents should be limited or narrowly construed. Patents also will not protect our
product candidates if competitors devise ways of making or using these product candidates without infringing our patents.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our
technologies, methods of treatment, product candidates, and any future products are covered by valid and enforceable patents or
are effectively maintained as trade secrets and we have the funds to enforce our rights, if necessary.
The expiration of our owned or licensed patents before completing the research and development of our product
candidates and receiving all required approvals in order to sell and distribute the products on a commercial scale can adversely
affect our business and results of operations.
Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are
involved in such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The
pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other
parties may obtain patents in the future and allege that the products or use of our technologies infringe these patent claims or that
we are employing their proprietary technology without authorization.
In addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents
or patent applications or those of others could result in adverse decisions regarding:
● the patentability of our inventions relating to our product candidates; and/or
● the enforceability, validity or scope of protection offered by our patents relating to our product candidates.
Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention
in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent
rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in
court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful
conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement
action successfully or have infringed patents declared valid, we may:
● incur substantial monetary damages;
● encounter significant delays in bringing our product candidates to market; and/or
● be precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment
requiring licenses.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent
protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality
agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect
our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential
information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In
addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation
could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret
protection could adversely affect our competitive business position.
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We are dependent upon our license agreement with Penn; if we breach the license agreement and/or fail to make payments
due and owing to Penn under our license agreement, our business will be materially and adversely affected.
Pursuant to the terms of our license agreement with Penn, which has been amended from time to time, we have acquired
exclusive worldwide licenses for patents and patent applications related to our proprietary Listeria vaccine technology. The
license provides us with the exclusive commercial rights to the patent portfolio developed at Penn as of the effective date of the
license, in connection with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to
commercialize the technology. As of October 31, 2018, we had $150,000 in outstanding payables to Penn. We can provide no
assurance that we will be able to make all future payments due and owing thereunder, that such licenses will not be terminated or
expire during critical periods, that we will be able to obtain licenses from Penn for other rights that may be important to us, or, if
obtained, that such licenses will be obtained on commercially reasonable terms. The loss of any current or future licenses from
Penn or the exclusivity rights provided therein could materially harm our business, financial condition and operating results.
If we are unable to obtain licenses needed for the development of our product candidates, or if we breach any of the
agreements under which we license rights to patents or other intellectual property from third parties, we could lose license
rights that are important to our business.
If we are unable to maintain and/or obtain licenses needed for the development of our product candidates in the future,
we may have to develop alternatives to avoid infringing on the patents of others, potentially causing increased costs and delays in
drug development and introduction or precluding the development, manufacture, or sale of planned products. Some of our
licenses provide for limited periods of exclusivity that require minimum license fees and payments and/or may be extended only
with the consent of the licensor. We can provide no assurance that we will be able to meet these minimum license fees in the
future or that these third parties will grant extensions on any or all such licenses. This same restriction may be contained in
licenses obtained in the future.
Additionally, we can provide no assurance that the patents underlying any licenses will be valid and enforceable. To the
extent any products developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross
profit from such product sales and may render the sales of such products uneconomical. In addition, the loss of any current or
future licenses or the exclusivity rights provided therein could materially harm our business financial condition and our
operations.
Risks Related to Our Financial Position and Capital Needs
We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable
future.
We are a clinical-stage biotechnology company. Investment in biotechnology product development is highly speculative
because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory
approval or become commercially viable. We have not generated any revenue from product sales to date, and we continue to incur
significant development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred
losses in each period since our inception.
We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue
our development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved
products. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may
adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses
and our ability to generate revenues. If any of our product candidates fails in clinical studies or do not gain regulatory approval, or
if approved, fails to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future,
we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will
continue to have an adverse effect on our stockholders’ (deficit) equity and working capital.
We will require additional capital to fund our operations and if we fail to obtain necessary financing we will not be able to
complete the development and commercialization of our product candidates.
The research and development of our products has consumed substantial amounts of cash since inception. We expect to
continue to invest in advancing the clinical development of our product candidates and to commercialize any product candidates
for which we receive regulatory approval. As of October 31, 2018, we had cash and cash equivalents of $45.1 million. We will
require additional capital for the further development of our product candidates. We are pursuing various ways to support our
development efforts including debt and/or equity financing as well as targeting potential collaborators of our products.
We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue
the development or commercialization of one or more of our products or product candidates or one or more of our other research
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and development initiatives. Our forecast of the period of time through which our financial resources will be adequate to support
our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a
number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on
assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
● The progress, timing, costs and results of the clinical studies underway;
● future clinical development plans we establish for our product candidates;
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● the number and characteristics of product candidates that we develop or may in-license;
● the outcome, timing and cost of meeting regulatory requirements established by the FDA and comparable foreign
regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we
perform more studies than those that we currently expect;
● the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
● the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against
us or our product candidates;
● the effect of competing technological and market developments;
● the cost and timing of completion of commercial-scale outsourced manufacturing activities; and
● the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may
receive regulatory approval in regions where we choose to commercialize our products on our own.
Our auditor’s report includes a going concern paragraph.
Our auditor’s report on our financial statements for the year ended October 31, 2018 includes a going concern paragraph.
The Company’s products that are being developed have not generated significant revenue. As a result, the Company has suffered
recurring losses and requires significant cash resources to execute its business plans. These losses are expected to continue for an
extended period of time. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going
concern within one year from the date of filing. The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of
liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the
financial statements are issued.
Historically, the major source of our cash has been from proceeds from various public and private offerings of our
common stock. Management’s plans to mitigate an expected shortfall of capital, to support future operations, include raising
additional funds. The actual amount of cash that it will need to operate is subject to many factors.
The Company also recognizes it will need to raise additional capital in order to continue to execute its business plan in
the future. There is no assurance that additional financing will be available when needed or that management will be able to
obtain financing on terms acceptable to the Company or whether the Company will become profitable and generate positive
operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to scale back its operations.
We have a material weakness in our internal control over financial reporting and our inability to remediate this weakness or
otherwise implement and maintain effective internal control over financial reporting, or the inability of our independent
registered public accounting firm to provide an unqualified report thereon, could have a material adverse effect on us.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which require management to certify financial and other information in
our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial
reporting.
The annual assessment for fiscal year 2018 resulted in the identification of a material weakness that existed as of
October 31, 2018, regarding the accounting for a derivative liability.
This material weakness could, among other things, adversely impact our ability to provide timely and accurate financial
information or result in a misstatement of the account balances or disclosures that would result in a material misstatement to our
annual or interim financial statements that would not be prevented or detected. The material weakness is described in greater
detail in Item 9A, Disclosure Controls and Procedures.
A substantial majority of our authorized shares of common stock under our certificate of incorporation are either outstanding
or reserved for issuance.
Our certificate of incorporation currently authorizes the issuance of 95,000,000 shares of common stock and 5,000,000
shares of preferred stock, par value $0.001 per share, for a total of 100,000,000 shares of capital stock. As of December 31, 2018,
a total of 6,082,766 shares of common stock are reserved for issuance upon the exercise of outstanding stock options, a total of
340,467 shares of common stock are reserved for issuance for outstanding restricted stock units and a total of 500,937 shares of
common stock are reserved for issuance in connection with future grants of stock options and/or future issuances of shares under
our 2015 Stock Incentive Plan, as amended. In addition, as of December 31, 2018, we have 952,999 shares of our common stock
are available for grant under the ESPP and we have outstanding warrants to purchase 14,169,542 shares of our common stock.
After taking into account the total number of shares of common stock issued and outstanding, in addition to the aggregate number
of shares of common stock reserved for future issuance as described above, approximately 3% of our authorized shares of
common stock remain available to be issued as of December 31, 2018.
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We currently intend to solicit the approval of our stockholders at our upcoming 2019 annual meeting of stockholders to
increase the number of authorized shares. Absent the approval, we are left without sufficient authorized shares of common stock
to pursue a variety of other business and financial objectives without further action of the stockholders (except when required by
applicable law or regulation). As a result, a delay in securing, or a failure to secure, stockholder approval to amend our certificate
of incorporation would seriously jeopardize the financial viability of the Company. Unless and until we attain the approval of our
stockholders to increase the number of authorized shares, our ability to manage our capital needs is restricted which may have a
material adverse effect on our business, results of operations and financial condition.
28
/
Additional authorized shares of common stock available for issuance may adversely affect the market price of our securities.
We are currently authorized to issue 95,000,000 shares of our common stock. As of December 31, 2018, we had
69,703,219 shares of our common stock issued and outstanding, excluding shares issuable upon exercise of our outstanding
warrants, options, convertible promissory notes and shares of common stock earned but not yet issued under our director
compensation program. Under our 2015 Employee Stock Purchase Plan, or ESPP, our employees can buy our common stock at a
discounted price. To the extent the shares of common stock are issued, options and warrants are exercised or convertible
promissory notes are converted, holders of our common stock will experience dilution. In the event of any future financing of
equity securities or securities convertible into or exchangeable for, common stock, holders of our common stock may experience
dilution. In addition, as of December 31, 2018 we had outstanding options to purchase 6,082,766 shares of our common stock at a
weighted average exercise price of $6.74 per share and outstanding warrants to purchase 14,169,542 shares of our common stock
(including the 14,166,666 warrants subject to anti-dilution protection); and 952,999 shares of our common stock are available for
grant under the ESPP.
Risks Related to Ownership of our Securities
Sales of additional equity securities may adversely affect the market price of our common stock and your rights may be
reduced.
We expect to continue to incur drug development and selling, general and administrative costs, and to satisfy our funding
requirements, we will need to sell additional equity securities, which may be subject to registration rights and warrants with anti-
dilutive protective provisions. The sale or the proposed sale of substantial amounts of our common stock or other equity securities
in the public markets may adversely affect the market price of our common stock and our stock price may decline substantially.
Our shareholders may experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their
shares. Also, new equity securities issued may have greater rights, preferences or privileges than our existing common stock.
The price of our common stock and warrants may be volatile.
The trading price of our common stock and warrants may fluctuate substantially. The price of our common stock and
warrants that will prevail in the market may be higher or lower than the price you have paid, depending on many factors, some of
which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose
part or all of your investment in our common stock and warrants. Those factors that could cause fluctuations include, but are not
limited to, the following:
● price and volume fluctuations in the overall stock market from time to time;
● fluctuations in stock market prices and trading volumes of similar companies;
● actual or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities
analysts;
● the issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
● general economic conditions and trends;
● positive and negative events relating to healthcare and the overall pharmaceutical and biotech sector;
● major catastrophic events;
● sales of large blocks of our stock;
● significant dilution caused by the anti-dilutive clauses in our financial agreements;
● departures of key personnel;
● changes in the regulatory status of our immunotherapies, including results of our clinical trials;
● events affecting Penn or any current or future collaborators;
● announcements of new products or technologies, commercial relationships or other events by us or our competitors;
● regulatory developments in the United States and other countries;
/
● failure of our common stock or warrants to be listed or quoted on The NASDAQ Stock Market, NYSE Amex Equities or
other national market system;
● changes in accounting principles; and
● discussion of us or our stock price by the financial and scientific press and in online investor communities.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of
securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and
resources from our business.
29
/
A limited public trading market may cause volatility in the price of our common stock.
The quotation of our common stock on the NASDAQ does not assure that a meaningful, consistent and liquid trading
market currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have
particularly affected the market prices of many smaller companies like us. Our common stock is thus subject to this volatility.
Sales of substantial amounts of common stock, or the perception that such sales might occur, could adversely affect prevailing
market prices of our common stock and our stock price may decline substantially in a short time and our shareholders could suffer
losses or be unable to liquidate their holdings.
The market prices for our common stock may be adversely impacted by future events.
Our common stock began trading on the over-the-counter-markets on July 28, 2005 and is currently quoted on the
NASDAQ Stock Market under the symbol ADXS. Market prices for our common stock and warrants will be influenced by a
number of factors, including:
● the issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
● changes in interest rates;
● significant dilution caused by the anti-dilutive clauses in our financial agreements;
● competitive developments, including announcements by competitors of new products or services or significant contracts,
acquisitions, strategic partnerships, joint ventures or capital commitments;
● variations in quarterly operating results;
● change in financial estimates by securities analysts;
● the depth and liquidity of the market for our common stock and warrants;
● investor perceptions of our company and the pharmaceutical and biotech industries generally; and
● general economic and other national conditions.
We are not currently in compliance with the continued listing requirements for NASDAQ. If the price of our common stock
continues to trade below $1.00 per share for a sustained period or we do not meet other continued listing requirements, our
common stock may be delisted from the NASDAQ Global Market, which could affect the market price and liquidity for our
common stock and reduce our ability to raise additional capital.
Our common stock is listed on the NASDAQ Global Market. In order to maintain that listing, we must satisfy minimum
financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share.
On October 23, 2018, we received a written notice from NASDAQ indicating that we are not in compliance with the minimum
bid price requirement for continued listing on the NASDAQ Global Market. We have until April 22, 2019 to regain compliance.
We can regain compliance if at any time prior to April 22, 2019 the bid price of our common stock closes at or above $1.00 per
share for a minimum of ten consecutive business days.
If we fail to regain compliance with the minimum bid price requirement by April 22, 2019, we may apply to transfer to
The NASDAQ Capital Market where we should be afforded an additional 180-day period to regain compliance provided that (i)
we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable
requirements for initial listing on the NASDAQ Capital Market (except for the bid price requirement) based on our most recent
public filings and market information and (ii) we notify NASDAQ of our intent to cure the bid price requirement deficiency prior
to the completion of the second 180-day compliance period by effecting a reverse stock split, if necessary. We anticipate that will
seek stockholder approval at our next annual meeting, in 2019, to grant discretionary authority to our board of directors to amend
our certificate of incorporation to effect a reverse split of our outstanding shares of common stock within a range of one share of
common stock for every ten shares of common stock to one share of common stock for every twenty shares of common stock,
with the exact reverse split ratio to be decided and publicly announced by the board of directors prior to the effective time of the
amendment to our certificate of incorporation. We intend to monitor the closing bid price of our common stock and consider our
available options to resolve our noncompliance with the minimum bid price requirement. There can be no assurance that we will
be able to regain compliance with the minimum bid price requirement or we will otherwise be in compliance with other
NASDAQ listing criteria. If we fail to regain compliance with the minimum bid requirement or to meet the other applicable
continued listing requirements for the NASDAQ Global Market in the future and NASDAQ determines to delist our common
stock, the delisting could adversely affect the market price and liquidity of our common stock and reduce our ability to raise
additional capital. In addition, if our common stock is delisted from NASDAQ and the trading price remains below $5.00 per
/
share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the
Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a
“penny stock” (generally, any equity security not listed on a national securities exchange or quoted on NASDAQ that has a
market price of less than $5.00 per share, subject to certain exceptions).
30
/
If we fail to remain current with our listing requirements, we could be removed from the NASDAQ Capital Market, which
would limit the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the
secondary market.
Companies trading on the NASDAQ Marketplace, such as our Company, must be reporting issuers under Section 12 of
the Exchange Act, as amended, and must meet the listing requirements in order to maintain the listing of our common stock on
the NASDAQ Capital Market. If we do not meet these requirements, the market liquidity for our securities could be severely
adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their
securities in the secondary market.
We may be at an increased risk of securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile, and in the past companies that have experienced volatility in the
market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in
the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other
business concerns, which could seriously harm our business.
We do not intend to pay cash dividends.
We have not declared or paid any cash dividends on our common stock, and we do not anticipate declaring or paying
cash dividends for the foreseeable future. Any future determination as to the payment of cash dividends on our common stock
will be at our Board of Directors’ discretion and will depend on our financial condition, operating results, capital requirements
and other factors that our Board of Directors considers to be relevant.
Our certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or
prevent a change in control, which may cause our stock price to decline.
Our certificate of incorporation, Bylaws and Delaware law contain provisions which could make it more difficult for a
third party to acquire us, even if closing such a transaction would be beneficial to our shareholders. To date, we have not issued
shares of preferred stock, however, we are authorized to issue up to 5,000,000 shares of preferred stock. This preferred stock may
be issued in one or more series, the terms of which may be determined at the time of issuance by our Board of Directors without
further action by shareholders. The terms of any series of preferred stock may include voting rights (including the right to vote as
a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund
provisions. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock,
and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock
could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present
management.
Provisions of our certificate of incorporation, Bylaws and Delaware law also could have the effect of discouraging
potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a
shareholder might consider favorable. Such provisions may also prevent or frustrate attempts by our shareholders to replace or
remove our management. In particular, the certificate of incorporation, Bylaws and Delaware law, as applicable, among other
things; provide the Board of Directors with the ability to alter the Bylaws without shareholder approval and provide that
vacancies on the Board of Directors may be filled by a majority of directors in office, and less than a quorum.
We are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions,
prohibits “business combinations” between a publicly-held Delaware corporation and an “interested shareholder,” which is
generally defined as a shareholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for
a three-year period following the date that such shareholder became an interested shareholder.
These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of our company to first negotiate with its board. These provisions may delay
or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline.
Item 1B: Unresolved Staff Comments.
None.
Item 2. Properties.
Our corporate offices and manufacturing facility are located in approximately 48,500 square feet of office space at 305
College Road East, Princeton, New Jersey 08540 which is occupied pursuant to a lease which expires on November 30, 2025.
/
Item 3. Legal Proceedings.
The information required under this item is set forth in Note 10. Commitments and Contingencies – Legal Proceedings
with this Form 10-K and is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
None.
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/
Item 5. Market for Our Common stock and Related Shareholder Matters.
PART II
Our common stock is listed on the NASDAQ Global Select Market under the symbol “ADXS”.
We have not declared or paid any cash dividends on our common stock, and we do not anticipate declaring or paying
cash dividends for the foreseeable future.
Recent Sales of Unregistered Securities
None.
Equity Compensation Plan Information
The following table provides information regarding the status of our existing equity compensation plans at October 31,
2018:
Number of shares of
common stock to be
issued on exercise of
outstanding options,
warrants and rights
Weighted- average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in the
previous columns)
4,951,049 $
489,270
-
5,440,319
8.19
N/A
-
N/A
N/A
N/A
-
1,525,692*
Plan category
Equity compensation plans approved by
security holders
Options
Restricted stock
Equity compensation plans not approved by
security holders
Total
* Number of securities remaining can be utilized for either options or restricted stock.
ITEM 6. Selected Financial Data .
Not applicable.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Conditions and Results of Operations and other portions of
this report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially
from those anticipated by the forward-looking information. Factors that may cause such differences include, but are not limited
to, availability and cost of financial resources, product demand, market acceptance and other factors discussed in this report
under the heading “Risk Factors”. This Management’s Discussion and Analysis of Financial Conditions and Results of
Operations should be read in conjunction with our financial statements and the related notes included elsewhere in this report.
32
/
Overview
Advaxis, Inc. (“Advaxis” or the “Company”) is a late-stage biotechnology Company focused on the discovery,
development and commercialization of proprietary Lm Technology antigen delivery products based on a platform technology that
utilizes live attenuated Listeria monocytogenes (“Lm”) bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-based
strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions into a single
immunotherapy by accessing and directing antigen presenting cells to stimulate anti-tumor T cell immunity, stimulate and activate
the immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the Tumor
Microenvironment (“TME”) to enable the T cells to attack tumor cells. The Company believes that Lm Technology
immunotherapies can complement and address significant unmet needs in the current oncology treatment landscape. Specifically,
their product candidates have the potential to optimize checkpoint performance, while having a generally well-tolerated safety
profile, and most of their product candidates are immediately available for treatment with a low cost of goods. The Company’s
passion for the clinical potential of Lm Technology is balanced by focus and fiscal discipline and driven towards increasing
shareholder value.
Advaxis is focused on four program areas in various stages of clinical and pre-clinical development, which they believe
will provide the greatest opportunity to have a significant impact on patients and their families:
● Human Papilloma Virus (“HPV”)-associated cancers
●
Personalized neoantigen-directed therapies
● Disease focused hotspot/‘off the shelf’ neoantigen-directed therapies
●
Prostate cancer
All four clinical program areas are anchored in the Company’s Lm TechnologyTM, a unique platform designed for its
ability to safely and effectively target various cancers in multiple ways. As an intracellular bacterium, Lm is an effective vector
for the presentation of antigens through both the Major Histocompatibility Complex (“MHC”) I and II pathways, due to its active
phagocytosis by Antigen Presenting Cells (“APCs”). Within the APCs, Lm produces virulence factors which allow survival in the
host cytosol and potently stimulate the immune system.
Results of Operations for the Year Ended October 31, 2018 Compared to the Year Ended October 31, 2017
Revenue
Revenue decreased $5.9 million to $6.1 million for the year ended October 31, 2018 compared to $12.0 million for the
year ended October 31, 2017. The decrease was due to changes in the estimated performance period associated with upfront fees
received from Amgen in conjunction with the collaboration agreement signed in August 2016.
Research and Development Expenses
We invest in research and development to advance our Lm technology through our pre-clinical and clinical development
programs. Research and development expenses for the years ended October 31, 2018 and 2017 were categorized as follows (in
thousands):
HPV-associated cancers
Personalized neoantigen-directed therapies
Hotspot mutation-based ‘off the shelf’ therapies
Prostate cancer
Other expenses
Partner reimbursements
Total research & development expense
Stock-based compensation expense included in research and
development expense
Years Ended
October 31,
2018
2017
$
$
24,272 $
2,331
1,204
2,844
32,082
(5,763)
56,970 $
26,650 $
2,287
120
3,880
48,071
(10,500)
70,508 $
Increase
(Decrease)
$
%
(2,378)
44
1,084
(1,036)
(15,989)
4,737
(13,538)
(9)%
2
903
(27)
(33)
(45)
(19)%
$
2,836 $
5,648 $
(2,812)
(50)%
33
/
HPV-associated cancers
The majority of the HPV-associated research and development costs include clinical trial and other related costs
associated with our axalimogene filolisbac (AXAL) programs in cervical and head and neck cancers. HPV-associated costs for the
year ended October 31, 2018 decreased approximately $2.4 million, or 9%, compared to the same period in 2017. The decrease
resulted from the winding down of the GOG-0265 study, as well as the winding down of several studies that are transitioning into
an Lm surveillance study (including our Fawcett study in anal cancer and our MEDI4736 study in combination with
MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, durvalumab). These decreases were partially offset by
the expansion of the Phase 3 AIM2CERV trial into additional countries in early 2018.
Personalized neoantigen-directed therapies
Research and development costs associated with our personalized neoantigen-directed therapy (ADXS-NEO) of $2.3
million for the year ended October 31, 2018 were consistent with our costs associated with this program in fiscal year 2017. In
June 2018, we announced the commencement of a Phase 1 trial with the dosing of the first patient with ADXS-NEO. ADXS-
NEO is being evaluated in an open-label, dose-escalation, multicenter clinical trial in the United States. The study is open to
patients with metastatic non-small cell lung cancer (NSCLC), metastatic microsatellite stable colon cancer and metastatic
squamous head and neck cancer and is being developed in collaboration with Amgen, who provided reimbursement for certain
research and development costs associated with conducting the clinical trial. In August 2016, we entered into a License and
Collaboration Agreement, with Amgen (“Amgen Agreement”) pertaining to the development and commercialization of our
ADXS-NEO program, whereby Amgen received an exclusive worldwide license to develop and commercialize the ADXS-NEO
program and we and Amgen collaborated through a joint steering committee for the development and commercialization of
ADXS-NEO and Amgen reimbursed us for certain research and development costs in support of the ADXS-NEO program. On
December 10, 2018, we received a written termination notice from Amgen with respect to the Amgen Agreement. We are
continuing to advance the program and anticipate having early biomarker, immunological and correlative data from the first
cohort of the study during the first half of 2019.
Hotspot mutation-based ‘off the shelf’ therapies
Research and development costs associated with our hotspot mutation-based therapies for the year ended October 31,
2018 increased approximately $1.1 million to $1.2 million compared to the same period in 2017. The increase is attributable to
the filing of an IND application for our ADXS-HOT drug candidate for non-small cell lung cancer and the startup costs associated
with the initiation of the Phase 1/2 clinical trial. This is the first study initiated using our ADXS-HOT construct which we believe
is applicable across several tumor types. We anticipate having safety and immune response on the first cohort of our first clinical
trial using ADXS-HOT, during the first half of 2019.
Prostate cancer
Research and development costs associated with our prostate cancer therapy for the year ended October 31, 2018
decreased approximately $1.0 million, or 27%, compared to the same period in 2017. The decrease is attributable to the winding
down of the Phase 2 study of our ADXS-PSA compound in combination with KEYTRUDA® (pembrolizumab), Merck’s
humanized monoclonal antibody against PD-1. This study is transitioning into an Lm surveillance study and we anticipate
providing an update on the clinical results of the Phase 2 portion of the study in the first half of 2019.
Other expenses
Other expenses include professional fees, laboratory costs and other internal and external costs associated with our
research & development activities. Other expenses for the year ended October 31, 2018 decreased approximately $16.0 million,
or 32%, compared to the same period in 2017. The decrease was primarily attributable to a decrease in laboratory costs, drug
manufacturing process validation and drug stability studies supporting our Marketing Authorization Application (“MAA”) in
Europe in fiscal year 2018 as the majority of the costs were incurred in fiscal year 2017 in support of the filing which occurred in
February 2018. In addition, there was a decrease in salary related expenses, including stock compensation, and travel expenses
resulting from a reduction in headcount.
Partner reimbursements
Partner reimbursements decreased approximately $4.7 million, or 45%, for the year ended October 31, 2018 compared to
the same period in 2017. The decrease partially relates to a reduction of $1.7 million in reimbursements from Amgen in support
of the ADXS-NEO program. Amgen reimbursements were $5.8 million for the year ended October 31, 2018 compared to
approximately $7.5 million for the year ended October 31, 2017 which covered one year of reimbursements during the year ended
October 31, 2018 as compared to reimbursements covering 15 months during the same period in 2017. On December 10, 2018,
the Company received a written notice of termination of the license and collaboration agreement with (see Note 9 to our financial
statements). In addition, in fiscal year 2017 the Company received $3.0 million from Stendhal for partner reimbursements
/
supporting the AIM2CERV study, but in fiscal year 2018, the Company did not receive its reimbursement of $3.0 million. We are
currently in arbitration proceedings with Stendhal (see Note 9 to our financial statements).
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/
General and Administrative Expenses
General and administrative expenses primarily include salary and benefit costs and stock-based compensation expense
for employees included in our finance, legal and administrative organizations. Also included in general and administrative
expenses are outside legal, professional services and facilities costs. General and administrative expenses for the years ended
October 31, 2018 and 2017 were as follows (in thousands):
Years Ended
October 31,
2018
2017
Increase
(Decrease)
$
%
General and administrative expense
$
19,472 $
39,969 $
(20,497)
(51)%
Stock-based compensation expense included in general and
administrative expense
$
4,147 $
22,188 $
(18,041)
(81)%
General and administrative expenses for the year ended October 31, 2018 decreased approximately $20.5 million, or
(51)%, compared to the same period in 2017. The decrease is primarily attributable to a decrease in stock-based compensation of
approximately $18.0 million related to the resignation of our Chief Executive Officer in July 2017, two Board members who did
not seek re-election in March 2018, the elimination of stock-based compensation paid to public relations consultants and a
reduction in headcount. In addition, there was a decrease to legal costs on general corporate matters and litigation settlements.
These decreases were partially offset by an increase in write-offs of abandoned patent applications.
Changes in Fair Values
For the year ended October 31, 2018, the Company recorded non-cash income from changes in the fair value of the
warrant liability of approximately $3.4 million. The decrease in the fair value of liability warrants resulting from a decrease in our
share price from $0.85 at September 11, 2018 (the date the liability warrants were issued) to $0.56 at October 31, 2018.
For the year ended October 31, 2017, the Company recorded non-cash income from changes in the fair value of the
warrant liability of approximately $20,000 due to the expiration of all the remaining the liability warrants.
Income Tax Benefit
During the year ended October 31, 2017, we recorded an income tax receivable of approximately $4.5 million from the
sale of its state NOLs and research and development tax credits for the year ended October 31, 2016. Following the receipt of the
NOL and research and development tax credit for the year ending October 31, 2016, we reached the limit under the NJ NOL
program.
Liquidity and Capital Resources
Going Concern and Managements Plans
Similar to other development stage biotechnology companies, our products that are being developed have not generated
significant revenue. As a result, the Company has suffered recurring losses and requires significant cash resources to execute its
business plans. These losses are expected to continue for an extended period of time. The aforementioned factors raise substantial
doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts
or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one
year after the date the financial statements are issued.
Historically, our major sources of cash have comprised proceeds from various public and private offerings of our
common stock, debt financings, option and warrant exercises, NOL tax sales, income earned on investments and grants, and
interest income. From October 2013 through October 2018, we raised approximately $265 million in gross proceeds from various
public and private offerings of our common stock. We have sustained losses from operations in each fiscal year since our
inception, and we expect losses to continue for the indefinite future. As of October 31, 2018 and 2017, we had an accumulated
deficit of approximately $367.7 million and $301.1 million, respectively, and stockholders’ equity of approximately $24.1 million
and $54.3 million, respectively.
As of December 31, 2018 and October 31, 2018, the Company had approximately $36.1 million and $45.1 million,
respectively, in cash, restricted cash and cash equivalents. Management’s plans to mitigate an expected shortfall of capital, to
support future operations, include raising additional funds. It is the belief of the Company that it expects to have sufficient capital
/
to fund its obligations, as they become due, in the ordinary course of business until September 2019. The actual amount of cash
that it will need to operate is subject to many factors. We have based this estimate on assumptions that may prove to be wrong,
and we could use available capital resources sooner than currently expected. Because of the numerous risks and uncertainties
associated with the development and commercialization of our product candidates, we are unable to estimate the amount of
increased capital outlays and operating expenses associated with completing the development of our current product candidates.
We recognize that we will need to raise additional capital in order to continue to execute its business plan in the future.
There is no assurance that additional financing will be available when needed or that we will be able to obtain financing on terms
acceptable to us or whether we will become profitable and generate positive operating cash flow. If we are unable to raise
sufficient additional funds, we will have to scale back our operations.
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/
Cash Flows
Operating Activities
Net cash used in operating activities was approximately $62.1 million for the year ended October 31, 2018 compared to
net cash used in operating activities of approximately $76.8 million for the year ended October 31, 2017. The decrease in the
amount of cash used in operating activities was attributed to decreased spending associated with research and development and
general and administrative activities, a reduction in headcount and an increase in proceeds received from the sale of our state
NOLs and R&D tax credits of approximately $1.9 million.
Investing Activities
Net cash provided by investing activities was approximately $43.2 million for the year ended October 31, 2018
compared to net cash used in investing activities of approximately $12.5 million for the year ended October 31, 2017. During the
year ended October 31, 2018, all of the Company’s remaining short-term investment securities matured and a portion of the
proceeds were used to fund operating activities, while in the prior year, a portion of the matured short-term investment securities
were re-invested. In addition, there was a reduction in property and equipment purchases in fiscal year 2018 of approximately
$2.0 million as compared to the prior year. During fiscal year 2018, there were $1.4 million in legal costs associated with
supporting of our intellectual property as compared to $1.2 million in fiscal year 2017.
Financing Activities
Net cash provided by financing activities was approximately $39.2 million for the year ended October 31, 2018 as
compared to approximately $0.4 million for the year ended October 31, 2017. The increase resulted primarily from net proceeds
of approximately $36.6 million from sales of 26,666,666 shares of our common stock in public offerings and approximately $2.7
million from the sale of 881,629 shares of our common stock in at-the-market transactions.
Off-Balance Sheet Arrangements
As of October 31, 2018, we had no off-balance sheet arrangements.
Critical Accounting Estimates
While we base our estimates and judgments on our experience and on various other factors that we believe to be
reasonable under the circumstances, actual results could differ from those estimates and the differences could be material. The
most significant estimates impact the following transactions, account balances or disclosures: revenue recognition, stock
compensation, impairment of intangibles and income tax disclosures.
Revenue Recognition
The Company derives the majority of its revenue from patent licensing. In general, these revenue arrangements provide
for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented
technologies owned or controlled by the Company. The intellectual property rights granted may be perpetual in nature, or upon
the final milestones being met, or can be granted for a defined, relatively short period of time, with the licensee possessing the
right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. The Company
recognizes licensing fees when there is persuasive evidence of a licensing arrangement, fees are fixed or determinable, delivery
has occurred and collectability is reasonably assured.
Revenue associated with nonrefundable upfront license fees under arrangements where the license fees and research and
development activities cannot be accounted for as separate units of accounting is deferred and recognized as revenue on a
straight-line basis over the expected period of performance.
Revenues from the achievement of research and development milestones, if deemed substantive, are recognized as
revenue when the milestones are achieved and the milestone payments are due and collectible. If not deemed substantive, the
Company recognizes such milestones as revenue on a straight-line basis over the remaining expected performance period under
the arrangement. All such recognized revenues are included in collaborative licensing and development revenue in the Company’s
statements of operations.
Milestones are considered substantive if all of the following conditions are met: (1) the milestone is nonrefundable; (2)
achievement of the milestone was not reasonably assured at the inception of the arrangement; (3) substantive effort is involved to
achieve the milestone; and (4) the amount of the milestone appears reasonable in relation to the effort expended, and the other
milestones in the arrangement and the related risk associated with the achievement of the milestone and any ongoing research and
development or other services are priced at fair value.
/
36
/
If product development is successful, the Company will recognize revenue from royalties based on licensees’ sales of its
products or products using its technologies. Royalties are recognized as earned in accordance with the contract terms when
royalties from licensees can be reasonably estimated and collectability is reasonably assured. If royalties cannot be reasonably
estimated or collectability of a royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is
received.
Deferred revenue represents the portion of payments received for which the earnings process has not been completed.
Deferred revenue expected to be recognized within the next 12 months is classified as a current liability.
An allowance for doubtful accounts is established based on the Company’s best estimate of the amount of probable
credit losses in the Company’s existing license fee receivables, using historical experience. The Company reviews its allowance
for doubtful accounts periodically. Past due accounts are reviewed individually for collectability. Account balances are charged
off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To
date, this is yet to occur.
Stock Based Compensation
We account for stock-based compensation using fair value recognition and record stock-based compensation as a charge
to earnings net of the estimated impact of forfeited awards. As such, we recognize stock-based compensation cost only for those
stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the
individual grants.
The process of estimating the fair value of stock-based compensation awards and recognizing stock-based compensation
cost over their requisite service period involves significant assumptions and judgments. We estimate the fair value of stock option
awards on the date of grant using the Black-Scholes option-valuation model for the remaining awards, which requires that we
make certain assumptions regarding: (i) the expected volatility in the market price of our common stock; (ii) dividend yield; (iii)
risk-free interest rates; and (iv) the period of time employees are expected to hold the award prior to exercise (referred to as the
expected holding period). As a result, if we revise our assumptions and estimates, our stock-based compensation expense could
change materially for future grants.
Stock-based compensation for employees, executives and directors is measured based on the fair value of the shares
issued on the date of grant and is to be recognized over the requisite service period in both research and development expenses
and general and administrative expenses on the statement of operations. For non-employees, the fair value of the award is
generally measured based on contractual terms.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The
Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the
statements of operations. For stock-based derivative financial instruments, the Company used the Monte Carlo valuation model to
value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of
the instrument could be required within 12 months of the balance sheet date.
Intangible Assets
Intangible assets primarily consist of legal and filing costs associated with obtaining patents and licenses and are
amortized on a straight-line basis over their remaining useful lives which are estimated to be twenty years from the effective dates
of the University of Pennsylvania (Penn) License Agreements, beginning in July 1, 2002. These legal and filing costs are invoiced
to the Company through Penn and its patent attorneys.
Management has reviewed its long-lived assets for impairment whenever events and circumstances indicate that the
carrying value of an asset might not be recoverable and its carrying amount exceeds its fair value, which is based upon estimated
undiscounted future cash flows. Net assets are recorded on the balance sheet for patents and licenses related to axalimogene
filolisbac (AXAL), ADXS-NEO, ADXS-HOT, ADXS-PSA and ADXS-HER2 and other products that are in development.
However, if a competitor were to gain FDA approval for a treatment before us or if future clinical trials fail to meet the targeted
endpoints, the Company would likely record an impairment related to these assets. In addition, if an application is rejected or fails
to be issued, the Company would record an impairment of its estimated book value.
Income Taxes
/
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740,
“Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the
current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an
entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the
available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be
realized.
ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-
recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company will
classify as income tax expense any interest and penalties. The Company has no material uncertain tax positions for any of the
reporting periods presented. The Company files tax returns in U.S. federal and state jurisdictions, including New Jersey, and is
subject to audit by tax authorities beginning with the year ended October 31, 2014.
37
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New Accounting Pronouncements
See Note 2 to our financial statements that discusses new accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8: Financial Statements and Supplementary Data.
The information required by this Item 8 is incorporated by reference to our financial statements and the related notes and
the report of our independent registered public accounting firm beginning at page F-1 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A: Controls and Procedures.
Assessment of the Effectiveness of Internal Controls over Financial Reporting
Under the supervision and with the participation of our management, including our chief executive officer and chief
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework published in 2013. Based on its evaluation, our management concluded that our internal control over financial
reporting was not effective as of the end of the period covered by this Annual Report on Form 10-K.
(a) Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer as to the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based
on that evaluation, the Chief Executive Officer and the Chief Financial Officer of the Company have concluded that, as of the end
of the period covered by this report, our disclosure controls and procedures are not effective because of the material weakness
discussed below under “Managements Report On Internal Control Over Financial Reporting.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to
provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control
over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
(ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made
only in accordance with the authorization of management and/or our Board of Directors; and
(iii) provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or
disposition of our assets that could have a material effect on our financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be
prevented or detected on a timely basis. We cannot assure you that we will adequately remediate the material weakness or that
additional material weaknesses in our internal controls will not be identified in the future. Any failure to maintain or implement
/
required new or improved controls or any difficulties we encounter in their implementation could result in additional material
weaknesses or could result in material misstatements in our financial statements.
38
/
The material weakness in our internal control over financial reporting as of October 31, 2018 was:
●
Complex and Non-routine Transactions — We did not maintain effective controls over the accounting for complex
and non-routine transactions. Specifically, we did not utilize sufficient technical accounting capabilities related to
complex and non-routine transactions with respect to the accounting for a derivative liability.
This material weakness resulted from the need to record a significant adjustment at year end, whereby the Company was
required to record a derivative liability for the fair value of warrants issued in a capital raise transaction. This issue arose, since
the provisions of the warrant agreement may require the Company to net cash settle, such warrants, should the holder of the
instrument elect to exercise their conversion option for shares of common stock and, at the time of the election, the Company has
not maintained an effective registration statement. This capital raise transaction occurred in the fourth quarter of the fiscal year
2018. Accounting treatment under these circumstances require liability treatment for instruments of this nature.
Remediation Efforts
We are in the process of developing certain remediation steps to address the previously disclosed material weakness
discussed above and to improve our internal control over financial reporting. We expect to complete our remediation process by
the end of the first quarter of fiscal 2019. The Company and the Board take the control and integrity of the Company’s financial
statements seriously and believe that the remediation steps described below are essential to maintaining a strong internal control
environment. The following remediation steps are among the measures that are being implemented by the Company:
Complex and Non-routine Transactions
●
●
Continued evaluation and enhancement of internal technical accounting capabilities augmented by the use of third-
party advisors and consultants to assist with areas requiring specialized technical accounting expertise and reviewed
by management.
Develop and implement technical accounting training, led by appropriate technical accounting experts, to enhance
awareness and understanding of standards and principles related to relevant complex technical accounting topics.
We are committed to maintaining a strong internal control environment, and believe that these remediation actions will
represent significant improvements in our controls. However, the identified material weakness in internal control over financial
reporting will not be considered remediated until controls have been designed and/or controls are in operation for a sufficient
period of time for our management to conclude that the material weakness has been remediated. Additional remediation measures
may be required, which may require additional implementation time. We will continue to assess the effectiveness of our
remediation efforts in connection with our evaluations of internal control over financial reporting.
Marcum LLP, an independent registered public accounting firm, has audited the Financial Statements included in this
Annual Report on Form l0-K and, as part of the audit, has issued an attestation report, included herein, on the effectiveness of our
internal control over financial reporting. See “Reports of Independent Registered Public Accounting Firm” included in this filing.
(c) Changes in Internal Control over Financial Reporting
During the quarter ended October 31, 2018, there were no changes in our internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will
prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within our company have been detected.
39
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
To the Shareholders and Board of Directors of
Advaxis, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Advaxis, Inc. ’s (the “Company”) internal control over financial reporting as of October 31, 2018, based on
criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. In our opinion, because of the effect of the material weakness described below, the Company has not
maintained, in all material respects, effective internal control over financial reporting as of October 31, 2018, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
A material weakness is deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented
or detected on timely basis. The following material weaknesses have been identified and included in management’s assessment.
Management has identified a material weakness in controls related to the company’s accounting for a derivative liability. This
material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018
financial statements, and this report does not affect our reported dated January 11, 2019, on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the balance sheets as of October 31, 2018 and 2017 and the related statements of operations, shareholders’ equity,
and cash flows for the years then ended of the Company and our report dated January 11, 2019 includes an explanatory paragraph
as to the Company’s ability to continue as a going concern.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual
Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
/
because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.
Marcum LLP
New York, NY
January 11, 2019
40
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Item 9B: Other Information.
None.
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Item 10: Directors, Executive Officers and Corporate Governance.
PART III
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual
Meeting of Stockholders.
Item 11: Executive Compensation.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual
Meeting of Stockholders.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual
Meeting of Stockholders.
Item 13: Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual
Meeting of Stockholders.
Item 14: Principal Accountant Fees and Services.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual
Meeting of Stockholders.
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Item 15: Exhibits and Financial Statements Schedules.
(a) 1. Financial Statements.
PART IV
For a list of the financial statements included herein, see Index to the Financial Statements on page F-1 of this Form 10-K.
2. Financial Statement Schedules.
No financial statement schedules have been submitted because they are not required or are not applicable or because the
information required is included in the financial statements or the notes thereto.
3. List of Exhibits.
See the Exhibit Index in Item 15(b) below.
Exhibit
Number
Description of Exhibits
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Amended and Restated Certificate of Incorporation. Incorporated by reference to Annex C to DEF 14A
Proxy Statement filed with the SEC on May 15, 2006.
Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock of the
registrant, dated September 24, 2009. Incorporated by reference to Exhibit 4.1 to Current Report on
Form 8-K filed with the SEC on September 25, 2009.
Certificate of Designations of Preferences, Rights and Limitations of Series B Preferred Stock of the
registrant, dated July 19, 2010. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K
filed with the SEC on July 20, 2010.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on August 16, 2012. Incorporated by reference to Exhibit 3.1 to Current Report on
Form 8-K filed with the SEC on August 17, 2012.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on July 11, 2013 (reverse stock split). Incorporated by reference to Exhibit 3.1 to
Current Report on Form 8-K filed with the SEC on July 15, 2013.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on July 12, 2013 (reverse stock split). Incorporated by reference to Exhibit 3.2 to
Current Report on Form 8-K filed with the SEC on July 15, 2013.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on July 9, 2014. Incorporated by reference to Exhibit 3.1 to Current Report on Form
8-K filed with the SEC on July 10, 2014.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on March 10, 2016. Incorporated by reference to Exhibit 3.1 to Current Report on
Form 8-K filed with the SEC on March 11, 2016.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on March 21, 2018. Incorporated by reference to Exhibit 3.1 to Current Report on
Form 8-K filed with the SEC on March 21, 2018.
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3.10
Amended and Restated Bylaws. Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form
10-QSB filed with the SEC on September 13, 2006.
4.1
4.2
4.3
4.4
4.5
4.6
10.1
Form of Common Stock certificate. Incorporated by reference to Exhibit 4.1 to Current Report on Form
8-K filed with the SEC on October 23, 2007.
Form of Common stock Purchase Warrant. Incorporated by reference to Exhibit 4.1 to Current Report on
Form 8-K filed with the SEC on August 31, 2011.
Form of Representative’s Warrant. Incorporated by reference to Exhibit 4.19 to Registration Statement
on Form S-1/A (File No. 333-188637) filed with the SEC on September 27, 2013.
Form of Representative’s Warrant related to the Underwriting Agreement, dated as of March 31, 2014,
by and between Advaxis, Inc. and Aegis Capital Group. Incorporated by reference to Exhibit 4.2 to
Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
Form of Warrant Agency Agreement, dated as of September 11, 2018 between Advaxis, Inc. and
Continental Stock Transfer and Trust Company (and Form of Warrant contained therein), Incorporated
by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the SEC on September 11, 2018.
Form of Common Stock Warrant dated September 11, 2018 (included in Exhibit 4.5)
2004 Stock Option Plan of the registrant. Incorporated by reference to Exhibit 4.1 to Report on Form S-8
filed with the SEC on December 1, 2005.
10.2
2005 Stock Option Plan of the registrant. Incorporated by reference to Annex A to DEF 14A Proxy
Statement filed with the SEC on May 15, 2006.
10.3
License Agreement, between the Trustees of the University of Pennsylvania and the registrant dated as
of June 17, 2002, as Amended and Restated on February 13, 2007. Incorporated by reference to Exhibit
10.11 to Annual Report on Form 10-KSB filed with the SEC on February 13, 2007.
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10.4
Amended and Restated 2009 Stock Option Plan of the registrant. Incorporated by reference to Annex A
to DEF 14A Proxy Statement filed with the SEC on April 30, 2010.
10.5
Second Amendment to the Amended and Restated Patent License Agreement between the registrant and
the Trustees of the University of Pennsylvania dated as of May 10, 2010. Incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on June 3, 2010.
10.6
2011 Omnibus Incentive Plan of registrant. Incorporated by reference to Annex A to DEF 14A Proxy
Statement filed with the SEC on August 29, 2011.
10.7
Amendment No. 1 to the Advaxis, Inc. 2011 Employee Stock Purchase Plan. Incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on December 20, 2011.
10.8
10.9
Amendment No. 1, dated as of March 26, 2007, to the License Agreement, between the Trustees of the
University of Pennsylvania and Advaxis, Inc. dated as of June 17, 2002, as amended and restated on
February 13, 2007. Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed
with the SEC on June 14, 2012.
Amendment No. 3, dated as of December 12, 2011, to the License Agreement, between the Trustees of
the University of Pennsylvania and Advaxis, Inc. dated as of June 17, 2002, as amended and restated on
February 13, 2007. Incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed
with the SEC on June 14, 2012.
10.10
Amendment No. 1 to 2011 Omnibus Incentive Plan of registrant. Incorporated by reference to Annex B
to DEF 14A Proxy Statement filed with the SEC on July 19, 2012.
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10.11
10.12 ‡
10.13
10.14‡
10.15
10.16
10.17‡
10.18
10.19
10.20
10.21
10.22
10.23
10.24‡
10.25
Indemnification Agreement. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K
filed with the SEC on August 20, 2013.
Employment Agreement between Advaxis, Inc. and Robert Petit, dated September 26, 2013.
Incorporated by reference to Exhibit 10.70 to Registration Statement on Form S-1/A (File No. 333-
188637) filed with the SEC on September 27, 2013.
Exclusive License and Technology Transfer Agreement by and between Advaxis, Inc. and Global
BioPharma, Inc., dated December 9, 2013. Incorporated by reference to Exhibit 10.79 to Annual Report
on Form 10-K/A filed with the SEC on February 6, 2014.
Amendment No. 1, dated as of December 19, 2013, to the Employment Agreement by and between
Advaxis, Inc. and Robert G. Petit. Incorporated by reference to Exhibit 10.82 to Annual Report on Form
10-K/A filed with the SEC on February 6, 2014.
Distribution and Supply Agreement, dated as of January 20, 2014, by and between Advaxis, Inc. and
Biocon, Limited. Incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q filed with
the SEC on March 17, 2014.
Exclusive License Agreement, dated March 19, 2014, by and between Advaxis, Inc. and Aratana
Therapeutics, Inc. Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed
with the SEC on June 10, 2014.
Amendment No. 2, dated as of June 5, 2014, to the Employment Agreement by and between Advaxis,
Inc. and Robert G. Petit. Incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q
filed with the SEC on June 10, 2014.
Clinical Trial Collaboration Agreement, dated July 21, 2014, by and between Advaxis, Inc. and
MedImmune, LLC. Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed
with the SEC on September 9, 2014.
5th Amendment to the Amended & Restated License Agreement, dated July 25, 2014, by and between
Advaxis, Inc. and University of Pennsylvania. Incorporated by reference to Exhibit 10.2 to Quarterly
Report on Form 10-Q filed with the SEC on September 9, 2014.
Amendment No. 2 to the Advaxis, Inc. 2011 Omnibus Incentive Plan, effective July 9, 2014.
Incorporated by reference to Annex A to Current Report on Schedule 14A filed with the SEC on May
20, 2014.
Amended and Restated 2011 Omnibus Incentive Plan, dated September 8, 2014. Incorporated by
reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed with the SEC on September 9, 2014.
Master Services Agreement for Technical Transfer and Clinical Supply, dated February 5, 2014, by and
between Advaxis, Inc. and SynCo Bio Partners B.V. Incorporated by reference to Exhibit 10.1 to
Current Report to Form 8-K filed with the SEC on February 11, 2014.
Clinical Trial Collaboration and Supply Agreement by and between Advaxis, Inc. and Merck & Co.
dated August 22, 2014. Incorporated by reference to Exhibit 10.101 to Annual Report on Form 10-K
filed with the SEC on January 6, 2015
Amendment No. 3, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis,
Inc. and Robert G. Petit. Incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q
filed with the SEC on June 15, 2015.
Exclusive License Agreement, dated August 25, 2015, by and between Advaxis, Inc. and Knight
Therapeutics, Inc. Incorporated by reference to Exhibit 10.57 to Annual Report on Form 10-K filed with
the SEC on January 8, 2016.
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10.26‡
10.27
10.28‡
Amendment No. 4, dated as of December 31, 2015, to the Employment Agreement by and between
Advaxis, Inc. and Robert G. Petit. Incorporated by reference to Exhibit 10.58 to Annual Report on Form
10-K filed with the SEC on January 8, 2016.
Co-Development and Commercialization Agreement between Advaxis, Inc. and Especificos Stendhal
SA de CV dated February 3, 2016. Incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q filed with the SEC on February 26, 2016.
Separation Agreement and General Release, dated July 6, 2017, between Advaxis, Inc. and Daniel J.
O’Connor. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC
on July 7, 2017.
10.29
2015 Incentive Plan of registrant. Incorporated by reference to Annex A to DEF 14A Proxy Statement
filed with the SEC on April 7, 2015.
10.30‡
Separation Agreement and General Release, dated April 23, 2018, between Advaxis, Inc. and Anthony
Lombardo. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC
on April 23, 2018.
10.31‡
Employment Agreement between Advaxis, Inc. and Molly Henderson, dated June 6,2018. Incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on June 6, 2018.
14.1
Code of Business Conduct and Ethics dated July 9, 2014. Incorporated by reference to Exhibit 14.1 to
Current Report on Form 8-K filed with the SEC on July 10, 2014.
23.1
31.1*
31.2*
32.1*
32.2*
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INS**
XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
*
**
‡
Filed herewith.
Furnished herewith.
Denotes management contract or compensatory plan or arrangement.
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ITEM 16. Form 10-K Summary
None.
48
/
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized, in Princeton, Mercer County, State of New Jersey, on this 11th
day of January, 2019.
SIGNATURE
ADVAXIS, INC.
By: /s/ Kenneth Berlin
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Kenneth Berlin and Molly Henderson (with full power to act alone), as his true and lawful attorneys-in-fact and agents, with full
powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE
Title
DATE
/s/ Kenneth Berlin
Kenneth Berlin
/s/ Molly Henderson
Molly Henderson
/s/ David Sidransky
David Sidransky
/s/ James Patton
James Patton
/s/ Richard Berman
Richard Berman
/s/ Samir Khleif
Samir Khleif
/s/ Roni Appel
Roni Appel
President, Chief Executive Officer and Director
January 11, 2019
(Principal Executive Officer)
Chief Financial Officer, Executive Vice President
(Principal Financial and Accounting Officer)
January 11, 2019
Chairman of the Board
January 11, 2019
Vice Chairman of the Board
January 11, 2019
Director
Director
Director
49
January 11, 2019
January 11, 2019
January 11, 2019
/
ADVAXIS, INC.
FINANCIAL STATEMENTS
INDEX
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Shareholders’ Equity
Statements of Cash Flows
Notes to the Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-8
/
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Advaxis, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Advaxis, Inc. (the “Company”) as of October 31, 2018 and 2017, the related
statements of operations, shareholders’ equity and cash flows for each of the two years in the period ended October 31, 2018, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of October 31, 2018 and 2017, and the results of its operations and
its cash flows for each of the two years in the period ended October 31, 2018, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of October 31, 2018, based on the criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in 2013 and our report dated January 11, 2019, expressed an adverse opinion on the effectiveness of the Company’s
internal control over financial reporting because of the existence of a material weakness.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As
more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its
obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2012.
New York, NY
January 11, 2019
F-2
/
ADVAXIS, INC.
BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investment securities
Income tax receivable
Deferred expenses
Prepaid expenses and other current assets
Total current assets
Property and equipment (net of accumulated depreciation)
Intangible assets (net of accumulated amortization)
Other assets
$
October 31,
2018
2017
$
44,141
977
-
-
2,072
3,275
50,465
6,684
4,838
280
23,900
587
46,398
4,453
2,986
2,919
81,243
7,111
4,857
431
Total assets
$
62,267
$
93,642
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Common stock warrant liability
Other current liabilities
Total current liabilities
Deferred revenue
Other liabilities
Total liabilities
$
$
5,646
6,185
4,476
6,517
48
22,872
14,189
1,155
38,216
5,121
8,700
6,995
-
48
20,864
17,479
1,039
39,382
Commitments and contingencies – Note 10
Shareholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; Series B
Preferred Stock; 0 shares issued and outstanding at October 31, 2018 and
2017. Liquidation preference of $0 at October 31, 2018 and 2017.
Common stock - $0.001 par value; 95,000,000 shares authorized, 69,556,452
shares issued and outstanding at October 31, 2018 and 41,206,538 shares
issued and outstanding at October 31, 2017.
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
-
-
70
391,638
(367,657)
24,051
62,267
$
41
355,361
(301,142)
54,260
93,642
The accompanying notes should be read in conjunction with the financial statements.
F-3
/
ADVAXIS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Year Ended October 31,
2018
2017
Revenue
$
6,063 $
12,031
Operating expenses:
Research and development expenses
General and administrative expenses
Total operating expenses
Loss from operations
Other income (expense):
Interest income
Net changes in fair value of derivative liabilities
Other expense
Net loss before income tax benefit
Income tax expense (benefit)
Net loss
Net loss per common share, basic and diluted
56,970
19,472
76,442
70,508
39,969
110,477
(70,379)
(98,446)
577
3,400
(63)
(66,465)
50
670
20
(82)
(97,838)
(4,403)
$
$
(66,515) $
(93,435)
(1.29) $
(2.31)
Weighted average number of common shares outstanding, basic and diluted
51,522,361
40,527,844
The accompanying notes should be read in conjunction with the financial statements.
F-4
/
Balance at October 31, 2016
Stock based compensation
Tax withholdings paid related to
net share settlement of equity
awards
Tax withholdings paid on equity
awards
Tax shares sold to pay for tax
withholdings on equity awards
Common stock issued upon
exercise of warrants
Issuance of shares to employees
under ESPP Plan
Advaxis at-the-market sales
Net Loss
Balance at October 31, 2017
Stock based compensation
Tax withholdings paid related to
net share settlement of equity
awards
Tax withholdings paid on equity
awards
Tax shares sold to pay for tax
withholdings on equity awards
Issuance of shares to employees
under ESPP Plan
Advaxis at-the-market sales
Advaxis public offerings
Net Loss
Balance at October 31, 2018
ADVAXIS, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share and per share data)
Preferred Stock
Shares Amount
- $ - 40,057,067 $ 40 $
1
1,030,507
Common Stock
Amount
Shares
Additional
Paid-In
Capital
Treasury Stock
Shares Amount
Accumulated
Deficit
Total
Shareholders’
Equity
(16,020) $
(130) $
(207,707) $
327,099
27,865
(357)
(997) (128,613)
(881)
843 144,633
1,011
225
26,594
92,145
1
251
656
- $
- 41,206,538 $
762,448
41 $
1
355,361
7,027
- $
- $
(93,435)
(301,142) $
(87)
(474)
460
39,171
881,629
26,666,666
1
27
50
2,658
26,643
- $
- 69,556,452 $
70 $
391,638
- $
- $
(66,515)
(367,657) $
The accompanying notes should be read in conjunction with the financial statements.
F-5
119,302
27,866
(357)
(1,878)
1,854
1
251
656
(93,435)
54,260
7,028
(87)
(474)
460
50
2,659
26,670
(66,515)
24,051
/
ADVAXIS, INC.
STATEMENT OF CASH FLOWS
(In thousands, except share and per share data)
OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Year Ended October 31,
2018
2017
$
(66,515) $
(93,435)
Stock compensation
Employee stock purchase plan expense
Gain on change in value of warrants
Loss on disposal of property and equipment
Write-off of intangible assets
Depreciation expense
Amortization expense of intangible assets
Net (accretion) amortization of premiums and discounts
Change in operating assets and liabilities:
Prepaid expenses and other current assets
Income taxes receivable
Other assets
Accounts payable and accrued expenses
Deferred revenue
Other liabilities
Net cash used in operating activities
INVESTING ACTIVITIES
Restricted cash established with letter of credit agreement
Purchases of investments
Proceeds from maturities of short-term investment securities
Purchase of property and equipment
Cost of intangible assets
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Net proceeds of issuance of common stock and warrants
Proceeds from the exercise of warrants
Proceeds from employee stock purchase plan
Tax withholdings paid related to net share settlement of equity awards
Employee tax withholdings paid on equity awards
Tax shares sold to pay for employee tax withholdings on equity awards
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
6,983
7
(3,400)
614
1,047
1,113
388
(6)
683
4,453
151
(1,954)
(5,809)
116
(62,129)
(390)
(12,487)
58,891
(1,425)
(1,416)
43,173
39,246
-
52
(87)
(474)
460
39,197
20,241
23,900
44,141 $
The accompanying notes should be read in conjunction with the financial statements.
F-6
27,836
80
(20)
3
315
791
330
184
(1,972)
(1,903)
1,325
1,160
(11,781)
245
(76,842)
(587)
(71,177)
63,930
(3,449)
(1,173)
(12,456)
656
1
171
(357)
(1,878)
1,854
447
(88,851)
112,751
23,900
/
Supplemental Disclosures of Cash Flow Information
Cash paid for taxes
Year Ended October 31,
2018
2017
$
50 $
50
Supplemental Schedule of Noncash Investing and Financing Activities
Accounts payable and accrued expenses settled with common stock
Property and equipment included in accounts payable and accrued expenses
$
$
- $
- $
75
66
Year Ended October 31,
2018
2017
The accompanying notes should be read in conjunction with the financial statements.
F-7
/
ADVAXIS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Advaxis, Inc. (“Advaxis” or the “Company”) is a late-stage biotechnology company focused on the discovery,
development and commercialization of proprietary Listeria monocytogenes (“Lm”) based antigen delivery products. The
Company is using its Lm platform directed against tumor-specific targets in order to engage the patient’s immune system to
destroy tumor cells. Through a license from the University of Pennsylvania, Advaxis has exclusive access to this proprietary
formulation of attenuated Lm called Lm Technology. Advaxis’ proprietary approach deploys a unique mechanism of action that
redirects the immune system to attack cancer cells in three distinct ways:
●
●
●
Alerting and training the immune system by activating multiple pathways in antigen-presenting cells (“APCs”)
with the
equivalent of multiple adjuvants;
Attacking the tumor by generating a strong, cancer-specific T cell response; and
Breaking down tumor protection through suppression of the protective cells in the tumor microenvironment
(“TME”) that shields
the tumor from the immune system. This enables the activated T cells to begin working to attack the tumor
cells.
Advaxis’ proprietary Lm platform technology has been clinically validated and dosed in over 500 patients across
multiple clinical trials and in various tumor types. The Company believes that Lm Technology immunotherapies can complement
and address significant unmet needs in the current oncology treatment landscape. Specifically, our product candidates have the
potential to work synergistically with other immunotherapies, including checkpoint inhibitors, while having a generally well-
tolerated safety profile.
Going Concern and Managements Plans
The Company’s products that are being developed have not generated significant revenue. As a result, the Company has
suffered recurring losses and requires significant cash resources to execute its business plans. These losses are expected to
continue for an extended period of time. The aforementioned factors raise substantial doubt about the Company’s ability to
continue as a going concern within one year from the date of filing. The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts
or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one
year after the date the financial statements are issued.
Historically, our major sources of cash have comprised proceeds from various public and private offerings of our
common stock, option and warrant exercises, and interest income. From October 2013 through October 2018, the Company raised
approximately $265 million in gross proceeds from various public and private offerings of our common stock.
As of December 31, 2018 and October 31, 2018, the Company had approximately $36.1 million and $45.1 million,
respectively, in cash, restricted cash and cash equivalents. Management’s plans to mitigate an expected shortfall of capital, to
support future operations, include raising additional funds. The actual amount of cash that it will need to operate is subject to
many factors.
The Company also recognizes it will need to raise additional capital in order to continue to execute its business plan in
the future. There is no assurance that additional financing will be available when needed or that management will be able to
obtain financing on terms acceptable to the Company or whether the Company will become profitable and generate positive
operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to scale back its operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Estimates are used when accounting for such items as the fair value and
recoverability of the carrying value of property and equipment and intangible assets (patents and licenses), deferred expenses and
deferred revenue, the fair value of options, warrants and related disclosure of contingent assets and liabilities. On an on-going
/
basis, the Company evaluates its estimates, based on historical experience and on various other assumptions that it believes to be
reasonable under the circumstances. Actual results may or may not differ from estimates.
F-8
/
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the
current period financial statements. These reclassifications had no effect on the previously reported net loss.
Collaboration Agreements
The Company evaluates whether an arrangement is a collaborative arrangement under the Financial Accounting
Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements, at its
inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an
arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the
participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the
endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs
incurred and revenue generated from third parties are recorded on a gross basis in the financial statements.
From time to time, the Company enters into collaborative arrangements for the research and development, manufacture
and/or commercialization of products and product candidates. These collaborations generally provide for non-refundable, upfront
license fees, research and development and commercial performance milestone payments, cost sharing, royalty payments and/or
profit sharing. The Company’s collaboration agreements with third parties are performed on a ‘‘best efforts’’ basis with no
guarantee of either technological or commercial success.
Revenue Recognition
The Company has derived the majority of its revenue from patent licensing and research and development services
associated with patent licensing. In general, these revenue arrangements provide for the payment of contractually determined fees
in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the
Company. The intellectual property rights granted may be perpetual in nature, or upon the final milestones being met, or can be
granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of
each contractual term for an additional minimum upfront payment. The Company recognizes licensing fees when there is
persuasive evidence of a licensing arrangement, fees are fixed or determinable, delivery has occurred and collectability is
reasonably assured.
Revenue associated with nonrefundable upfront license fees under arrangements where the license fees and research and
development activities cannot be accounted for as separate units of accounting is deferred and recognized as revenue on a
straight-line basis over the expected period of performance.
Revenues from the achievement of research and development milestones, if deemed substantive, are recognized as
revenue when the milestones are achieved and the milestone payments are due and collectible. If not deemed substantive, the
Company recognizes such milestones as revenue on a straight-line basis over the remaining expected performance period under
the arrangement. All such recognized revenues are included in collaborative licensing and development revenue in the Company’s
statements of operations.
Milestones are considered substantive if all of the following conditions are met: (1) the milestone is nonrefundable; (2)
achievement of the milestone was not reasonably assured at the inception of the arrangement; (3) substantive effort is involved to
achieve the milestone; and (4) the amount of the milestone appears reasonable in relation to the effort expended, and the other
milestones in the arrangement and the related risk associated with the achievement of the milestone and any ongoing research and
development or other services are priced at fair value.
If product development is successful, the Company will recognize revenue from royalties based on licensees’ sales of its
products or products using its technologies. Royalties are recognized as earned in accordance with the contract terms when
royalties from licensees can be reasonably estimated and collectability is reasonably assured. If royalties cannot be reasonably
estimated or collectability of a royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is
received.
Deferred revenue represents the portion of payments received for which the earnings process has not been completed.
Deferred revenue expected to be recognized within the next 12 months is classified as a current liability.
An allowance for doubtful accounts is established based on the Company’s best estimate of the amount of probable
credit losses in the Company’s existing license fee receivables, using historical experience. The Company reviews its allowance
for doubtful accounts periodically. Past due accounts are reviewed individually for collectability. Account balances are charged
off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To
date, this is yet to occur.
/
F-9
/
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less from the date of
purchase to be cash equivalents.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits.
Approximately $43.8 million is subject to credit risk at October 31, 2018. However, these cash balances are maintained at
creditworthy financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to
any significant credit risk.
Restricted Cash and Letter of Credit
During July 2017 and January 2018, the Company established two letters of credit with a financial institution as security
for the purchase of custom equipment and as security for application fees associated with the Company’s Marketing
Authorization Application (“MAA”) in Europe. The letters of credit are collateralized by cash which is unavailable for
withdrawal or for usage for general obligations. No amount is outstanding under either letter of credit as of October 31, 2018.
Investments
Investment securities consist of certificates of deposit, domestic governmental agency loans, and U.S. treasury notes.
The Company classifies these securities as held-to-maturity. Held-to-maturity securities are those securities in which the
Company has the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization or accretion of premiums or discounts. Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the effective interest method.
A decline in the market value of any investment security below cost, that is deemed to be other than temporary, results in
a reduction in the carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is
established. Other-than-temporary impairment charges are included in Other Income (Expense), net. The Company did not
recognize any impairment charges during the years ended October 31, 2018 or 2017. Interest income is recognized when earned.
Deferred Expenses
Deferred expenses consist of advanced payments made on research and development projects. Expense is recognized in
the Statement of Operations as the research and development activity is performed.
Property and Equipment
Property and equipment is stated at cost. Additions and improvements that extend the lives of the assets are capitalized,
while expenditures for repairs and maintenance are expensed as incurred. Leasehold improvements are amortized on a straight-
line basis over the shorter of the asset’s estimated useful life or the remaining lease term. Depreciation is calculated on a straight-
line basis over the estimated useful lives of the assets ranging from three to ten years.
When depreciable assets are retired or sold the cost and related accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in operations.
Intangible Assets
Intangible assets are recorded at cost and include patents and patent application costs, licenses and software. Intangible
assets are amortized on a straight-line basis over their estimated useful lives ranging from 3 to 20 years. Patent application costs
are written-off if the application is rejected, withdrawn or abandoned.
Impairment of Long-Lived Assets
The company reviews its long-lived assets, including property and equipment and intangible assets, for impairment
whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. Recoverability of assets
held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be
generated from the use of the asset and its eventual disposition. If the total of the undiscounted future cash flows is less than the
carrying amount of those assets, an impairment loss is recognized in the Statement of Operations based on the excess of the
carrying amount over the fair value of the asset.
F-10
/
Net Income (Loss) per Share
Basic net income or loss per common share is computed by dividing net income or loss available to common
shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share give
effect to dilutive options, warrants, convertible debt and other potential common stock outstanding during the period. In the case
of a net loss the impact of the potential common stock resulting from warrants, outstanding stock options and convertible debt are
not included in the computation of diluted loss per share, as the effect would be anti-dilutive. In the case of net income, the impact
of the potential common stock resulting from these instruments that have intrinsic value are included in the diluted earnings per
share. The table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per
share.
Warrants
Stock options
Restricted stock units
Total
Research and Development Expenses
As of October 31,
2018
14,169,542
4,951,049
489,270
19,609,861
2017
3,092,935
3,893,558
1,363,119
8,349,612
Research and development costs are expensed as incurred and include but are not limited to clinical trial and related
manufacturing costs, payroll and personnel expenses, lab expenses, and related overhead costs.
Stock Based Compensation
The Company has an equity plan which allows for the granting of stock options to its employees, directors and
consultants for a fixed number of shares with an exercise price equal to the fair value of the shares at date of grant. The Company
measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For
employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the
award is generally measured based on contractual terms. The fair value amount is then recognized over the requisite service
period, usually the vesting period, in both research and development expenses and general and administrative expenses on the
statement of operations, depending on the nature of the services provided by the employees or consultants.
The process of estimating the fair value of stock-based compensation awards and recognizing stock-based compensation
cost over their requisite service period involves significant assumptions and judgments. The Company estimates the fair value of
stock option awards on the date of grant using the Black Scholes Model (“BSM”) for the remaining awards, which requires that
the Company makes certain assumptions regarding: (i) the expected volatility in the market price of its common stock; (ii)
dividend yield; (iii) risk-free interest rates; and (iv) the period of time employees are expected to hold the award prior to exercise
(referred to as the expected holding period). As a result, if the Company revises its assumptions and estimates, stock-based
compensation expense could change materially for future grants.
The Company accounts for stock-based compensation using fair value recognition and records forfeitures as they occur.
As such, the Company recognizes stock-based compensation cost only for those stock-based awards that vest over their requisite
service period, based on the vesting provisions of the individual grants.
Treasury Stock
The Company accounts for repurchases of common stock and shares withheld in lieu of taxes when restricted stock vests
using the cost method with common stock in treasury classified in the balance sheet as a reduction in shareholders’ equity.
Fair Value of Financial Instruments
The carrying value of financial instruments, including cash and cash equivalents, restricted cash and accounts payable
approximated fair value as of the balance sheet date presented, due to their short maturities.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The
Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the
statements of operations. For stock-based derivative financial instruments, the Company used the Monte Carlo valuation model to
/
value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of
the instrument could be required within 12 months of the balance sheet date.
F-11
/
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740,
“Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the
current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an
entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the
available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be
realized.
Recent Accounting Standards
In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU, No. 2016-02, Leases (Topic 842),
which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b)
requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases
on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12
months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption
permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the
earliest comparative period presented in the financial statements, including a number of optional practical expedients that entities
may elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, an update
which provides another transition method, in addition to the existing modified retrospective transition method, by allowing
entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening
balance of retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting ASU 2016-02
on the Company’s financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new
standard changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and
restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-
period total amounts shown on the statement of cash flows. The new standard is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. This ASU is not expected to have a
material impact on the Company’s financial statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of
a Business.” The amendments in this Update clarify the definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The
amendments in this Update provide a screen to determine when a set is not a business. If the screen is not met, it (1) requires that
to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing
elements. This Update is the final version of Proposed ASU 2015-330 Business Combinations (Topic 805) – Clarifying the
Definition of a Business, which has been deleted. The amendments in this Update are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. This ASU is not
expected to have a material impact on the Company’s financial statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of
Modification Accounting” to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying
the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment
award. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based
payment award require an entity to apply modification accounting in Topic 718. This Update is the final version of Proposed ASU
2016-360—Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting, which has been deleted. The
amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods,
beginning after December 15, 2017. Early adoption is permitted. This ASU is not expected to have a material impact on the
Company’s financial statements.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which expands the scope of Topic 718 to include all
share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718
applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its
own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based
payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or
services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years beginning after
/
December 15, 2018, including interim periods within those fiscal years, with early adoption permitted, but no earlier than our
adoption of ASC 606. This ASU is not expected to have a material impact on the Company’s financial statements.
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/
Recently Adopted Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-
09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern
the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.
Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from
Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU No.
2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU
2016-12”); ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
(“ASU 2016-20”); Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),
and Leases (Topic 842) (“ASU 2017-13”); and ASU 2017-14, Income Statement—Reporting Comprehensive Income (Topic
220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) (“ASU 2017-14”). The
Company must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-13 and ASU 2017-14 with ASU
2014-09 (collectively, the “new revenue standards”). The new revenue standards may be applied retrospectively to each prior
period presented or retrospectively with the cumulative effect recognized as of the date of adoption.
The Company has completed its assessment of the impact that the standard will have on revenue recognition. The
Company has reviewed contracts for all material revenue streams and assessed potential impacts on the Company’s financial
statements, results of operations, cash flows, disclosures, and internal controls over financial reporting. The Company currently
recognizes most of its revenue over time. Management has determined that this will remain materially consistent upon adoption
of the new standard and no adjustment to the Company’s financial position, results of operations, or cash flows will be necessary
upon adoption. Additionally, the Company will make additional disclosures related to the revenues arising from contracts with
customers as required by the new standard. The Company has adopted this guidance effective November 1, 2019 using the
modified retrospective approach.
In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties About an Entity’s Ability to Continue
as a Going Concern. The new standard provides guidance around management’s responsibility to evaluate whether there is
substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new
standard is effective for fiscal years, and interim periods within those fiscal years, ending after December 15, 2016. The Company
adopted this standard effective for the year ending October 31, 2017. There was no impact on the Company’s financial statements.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Equity from
Liabilities (Topic 480) and Derivatives and Hedging (Topic 815) (“ASU 2017-11”), which addresses the complexity of
accounting for certain financial instruments with down round features and finalizes pending guidance related to mandatorily
redeemable noncontrolling interests. Under ASU 2017-11, when determining whether certain financial instruments should be
classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing
whether the instrument is indexed to an entity’s own stock. ASU 2017-11 becomes effective for annual reporting periods
beginning after December 15, 2018, including interim periods thereafter; early adoption is permitted, including adoption in an
interim period. The Company early adopted this standard utilizing the modified retrospective method, which is defined in ASU
2017-11 as, “retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect
adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s).” Since the
Company didn’t have any financial instruments with a down round feature as of November 1, 2017, the beginning of the fiscal
year of adoption, the adoption of this standard did not have an impact on the Company’s financial statements.
In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808)—Clarifying the
Interaction between Topic 808 and Topic 606” (“ASU 2018-18”). The amendments in ASU 2018-18 make targeted improvements
to generally accepted accounting principles (GAAP) for collaborative arrangements by clarifying that certain transactions
between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative
arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should
be applied, including recognition, measurement, presentation, and disclosure requirements. In addition, unit-of-account guidance
in Topic 808 was aligned with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether
the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. ASU 2018-18 is effective for fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including
adoption in any interim period. The amendments in this Update should be applied retrospectively to the date of initial application
of Topic 606. The Company has adopted this guidance effective November 1, 2018 using the modified retrospective approach.
There was no impact on the Company’s financial statements.
F-13
/
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if
adopted, would have a material impact on the accompanying financial statements.
3. INVESTMENTS
The following table summarizes the Company’s investment securities at amortized cost as of October 31, 2017 (in
thousands):
October 31, 2017
Amortized
Cost,
as Adjusted
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Estimated Fair
Value
Short-term investments:
Certificates of Deposit
Domestic Governmental Agency Loans
U.S Treasury Notes
Total short-term investment securities
$
$
11,391 $
500
34,507
46,398 $
- $
-
-
- $
- $
-
25
25 $
11,391
500
34,482
46,373
As of October 31, 2018, all of the Company’s short-term investment securities have matured.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
Leasehold improvements
Laboratory equipment
Furniture and fixtures
Computer equipment
Construction in progress
Total property and equipment
Accumulated depreciation and amortization
Net property and equipment
October 31,
2018
2017
2,321 $
5,510
746
409
17
9,003
(2,319)
6,684 $
2,168
4,381
729
395
645
8,318
(1,207)
7,111
$
$
Depreciation expense for the years ended October 31, 2018 and 2017 was approximately $1.1 million and $0.8 million,
respectively. Laboratory equipment having a net book value of approximately $614,000 and $3,000 was disposed and was
charged to research and development expenses in the statement of operations for the years ended October 31, 2018 and 2017,
respectively.
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
Patents
License
Software
Total intangibles
Accumulated amortization
Net intangible assets
October 31,
2018
2017
5,970 $
777
117
6,864
(2,026)
4,838 $
5,727
777
109
6,613
(1,756)
4,857
$
$
The expirations of the existing patents range from 2018 to 2038 but the expirations can be extended based on market
approval if granted and/or based on existing laws and regulations. Capitalized costs associated with patent applications that are
abandoned without future value are charged to expense when the determination is made not to pursue the application. Patent
applications having a net book value of approximately $1.0 million and $0.3 million and were abandoned and were charged to
general and administrative expenses in the statement of operations for the years ended October 31, 2018 and 2017, respectively.
Intangible asset amortization expense that was charged to general and administrative expense in the statement of operations was
approximately $0.4 million and $0.3 million for the years ended October 31, 2018 and 2017, respectively.
/
F-14
/
At October 31, 2018, the estimated amortization expense by fiscal year based on the current carrying value of intangible
assets is as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total
6. ACCRUED EXPENSES:
$
$
392
376
356
356
356
3,002
4,838
The following table represents the major components of accrued expenses (in thousands):
Salaries and other compensation
Vendors
Professional fees
Total accrued expenses
October 31,
2018
2017
$
$
2,035 $
3,660
490
6,185 $
2,653
2,812
3,235
8,700
7. COMMON STOCK PURCHASE WARRANTS AND WARRANT LIABILITY
Warrants
A summary of warrant activity was as follows (In thousands, except share and per share data):
Outstanding and exercisable warrants at October 31, 2016
Exercised
Expired
Outstanding and exercisable warrants at October 31, 2017
Issued
Expired
Outstanding and exercisable warrants at October 31, 2018
Weighted
Average
Remaining
Contractual
Life
In Years
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
5.04
5.00
11.43
5.00
1.50
5.00
1.50
1.91 $
9,558
.92 $
5.87 $
-
-
Shares
3,110,575 $
(225)
(17,955)
3,092,395 $
14,166,666
(3,089,519)
14,169,542 $
At October 31, 2018, the Company had 2,876 of its total 14,169,542 outstanding warrants classified as equity (equity
warrants). At October 31, 2017, the Company had all of its total 3,092,395 outstanding warrants classified as equity warrants. At
issuance, equity warrants are recorded at their relative fair values, using the Relative Fair Value Method, in the shareholders
equity section of the balance sheet.
Warrant Liability
At October 31, 2018, the Company had 14,166,666 of its total 14,169,542 outstanding warrants classified as liabilities
(liability warrants). These warrants contain a down round feature, except for exempt issuances as defined in the warrant
agreement, in which the exercise price would immediately be reduced to match a dilutive issuance of common stock, options,
convertible securities and changes in option price or rate of conversion. As of October 31, 2018, the down round feature was not
triggered. The warrants require liability classification as the warrant agreement requires the Company to maintain an effective
registration statement and does not specify any circumstances under which net cash settlement would be permitted or required. As
a result, net cash settlement is assumed and liability classification is warranted. For these liability warrants, the Company utilized
the Monte Carlo Model to calculate the fair value of these warrants at issuance and at each subsequent reporting date. During the
year ended October 31, 2018, 14,166,666 warrants were issued at an exercise price of $1.50 with a term of six years. The warrants
were valued at approximately $9.9 million on the September 11, 2018 issuance using the Monte Carlo Model. In determining the
fair warrant of the warrants issued on September 11, 2018, the Company used the following inputs in its Monte Carlo Model.
Exercise price $0.85, stock price $1.50, expected term 6 years, volatility 99.21% and risk free interest rate 2.91%.
/
At October 31, 2017, the Company had no outstanding warrants classified as liability warrants as the remaining liability
warrants expired. The warrants required liability classification as the warranted contained a cash settlement provision in the event
of a fundamental transaction. For the liability warrants that expired during the year ended October 31, 2017, the Company utilized
the Black-Scholes Model to calculate the fair value of these warrants at issuance and at each subsequent reporting date.
At October 31, 2018 and October 31, 2017, the fair value of the warrant liability was approximately $6.5 million and $0,
respectively. For the years ended October 31, 2018 and 2017, the Company reported income of approximately $3.4 million and
$20,000, respectively, due to changes in the fair value of the warrant liability.
In measuring the warrant liability at October 31, 2018, the Company used the following inputs in its Monte Carlo Model:
Exercise Price
Stock Price
Expected Term
Volatility %
Risk Free Rate
$
$
October 31 ,2018
1.50
0.56
5.87 years
97.47%
3.03%
F-15
/
8. SHARE BASED COMPENSATION
The following table summarizes share-based compensation expense included in the statement of operations by expense
category for the years ended October 31, 2018 and 2017 (in thousands):
Research and development
General and administrative
Total
Amendments
Year Ended October 31,
2017
2018
$
$
2,836 $
4,147
6,983 $
5,648
22,188
27,836
The Advaxis, Inc. 2015 Incentive Plan (the “2015 Plan”) was originally ratified and approved by the Company’s
stockholders on May 27, 2015. Subject to proportionate adjustment in the event of stock splits and similar events, the aggregate
number of shares of common stock that may be issued under the 2015 Plan is 3,600,000 shares, plus a number of additional
shares (not to exceed 650,000) underlying awards outstanding as of the effective date of the 2015 Plan under the prior plan that
thereafter terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason.
At the Annual Meeting of Stockholders of the Company held on March 10, 2016, the stockholders ratified and approved
an amendment to the 2015 Plan to increase the aggregate number of shares of common stock authorized for issuance under such
plan from 3,600,000 shares to 4,600,000 shares. Furthermore, the stockholders approved an amendment to the Company’s
Certificate of Incorporation to increase the total number of authorized shares of common stock from 45,000,000 shares of
common stock to 65,000,000 shares of common stock.
At the Annual Meeting of Stockholders of the Company held on April 5, 2017, the stockholders ratified and approved an
amendment to the 2015 Plan to increase the aggregate number of shares of common stock authorized for issuance under such plan
from 4,600,000 shares to 6,100,000 shares. The amendment also included a provision that provides for pre-defined annual
increases in the number of shares available for issuance under the Plan equal to the lesser of: (i) 5% of the total number of shares
of common stock outstanding, (ii) 2,500,000, or (iii) a lesser number determined by the Board of Directors. On January 1, 2018,
2,066,147 shares, or 5% of the total number of shares of common stock outstanding, were added to the 2015 Plan.
At the Annual Meeting of Stockholders of the Company held on March 21, 2018, the stockholders ratified and approved
an amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of common stock
from 65,000,000 shares of common stock to 95,000,000 shares of common stock. As of October 31, 2018, there were 1,525,692
shares available for issuance under the 2015 Plan.
Restricted Stock Units (RSUs)
A summary of the Company’s RSU activity and related information for the year ended October 31, 2018 and 2017 is as
follows:
Balance at October 31, 2016:
Granted
Vested
Cancelled
Balance at October 31, 2017
Granted
Vested
Cancelled
Balance at October 31, 2018
Number of
RSU’s
Weighted-Average
Grant Date Fair Value
10.77
7.90
9.15
8.74
8.54
1.97
7.71
8.23
4.69
719,448 $
1,632,134
(877,383)
(111,080)
1,363,119 $
409,950
(808,097)
(475,702)
489,270 $
F-16
/
The fair value of the RSUs as of the respective vesting dates was approximately $1.6 million and $6.0 million for the
years ended October 31, 2018 and 2017 respectively.
As of October 31, 2018, there was approximately $1.7 million of unrecognized compensation cost related to non-vested
RSUs, which is expected to be recognized over a remaining weighted average vesting period of approximately 1.45 years.
As of October 31, 2018, the aggregate intrinsic value of non-vested RSUs was approximately $275,000.
Employee Stock Awards
Common stock issued to executives and employees related to vested incentive retention awards, employment
inducements, management purchases and employee excellence awards totaled 733,105 shares (687,448 shares on a net basis after
employee taxes) and 878,948 shares (834,600 shares on a net basis after employee taxes) during the years ended October 31, 2018
and 2017, respectively. Total stock compensation expense associated with these awards for the years ended October 31, 2018 and
2017 was approximately $3.1 million and $8.9 million, respectively.
Included in compensation expense for the year ended October 31, 2018 was approximately $0.1 million and $0.3
million, respectively, recognized as a result of the modification of certain RSU’s associated with the resignation of the Company’s
Chief Financial Officer in April 2018 and Chief Operating Officer in June 2018. Pursuant to the separation agreements, the
vesting was accelerated on all of the outstanding RSU’s.
Director Stock Awards
During the years ended October 31, 2018 and 2017, common stock issued to the Directors for compensation related to
board and committee membership was 75,000 shares and 30,000 shares, respectively. During the years ended October 31, 2018
and 2017, total stock compensation expense to the Directors was $0.2 million and $0.4 million, respectively.
Stock Options
A summary of changes in the stock option plan for the years ended October 31, 2018 and 2017 is as follows (In
thousands, except share and per share data):
Outstanding as of October 31, 2016
Granted
Cancelled or expired
Outstanding as of October 31, 2017
Granted
Cancelled or expired
Outstanding as of October 31, 2018
Vested and exercisable at October 31, 2018
Weighted
Average
Shares
3,351,795 $
556,952
(15,189)
3,893,558 $
2,518,060
(1,460,569)
4,951,049 $
2,827,171 $
Exercise Price
13.31
7.71
14.07
12.51
2.06
9.14
8.19
8.19
F-17
Weighted
Average
Remaining
Contractual Life
In Years
Aggregate
Intrinsic Value
7.82 $
62
5.72 $
6.56 $
4.38 $
-
-
-
/
The following table summarizes information about the outstanding and exercisable options at October 31, 2018:
Options Outstanding
Options Exercisable
Exercise
Price Range
Number
Outstanding Contractual
Price Value Exercisable Contractual
Weighted Weighted
Average Average
Remaining Exercise Intrinsic Number
$
$
$
$
0.60 - $4.99 2,037,108
526,029
5.00 - $9.99
10.00 - $14.99 2,199,592
188,320
15.00 - $21.25
9.53 $
5.20 $
4.42 $
3.07 $
1.97 $
7.98 $
13.14 $
18.12 $
-
-
-
-
165,834
393,424
2,079,593
188,320
Weighted Weighted
Average Average
Remaining Exercise Intrinsic
Price Value
-
-
-
-
3.22 $
8.07 $
13.16 $
18.12 $
7.27 $
4.37 $
4.27 $
3.07 $
The fair value of each option granted from the Company’s stock option plans during the years ended October 31, 2018
and 2017 was estimated on the date of grant using the Black-Scholes option-pricing model. Using this model, fair value is
calculated based on assumptions with respect to (i) expected volatility of the Company’s common stock price, (ii) the periods of
time over which employees and Board Directors are expected to hold their options prior to exercise (expected lives), (iii) expected
dividend yield on the Company’s common stock, and (iv) risk-free interest rates, which are based on quoted U.S. Treasury rates
for securities with maturities approximating expected lives of the options. The Company used their own historical volatility in
determining the volatility to be used. The expected term of the stock option grants was calculated using the “simplified” method
in accordance with the SEC Staff Accounting Bulletin 107. The “simplified” method was used since the Company believes its
historical data does not provide a reasonable basis upon which to estimate expected term and the Company does not have enough
option exercise data from its grants issued to support its own estimate as a result of vesting terms and changes in the stock price.
The expected dividend yield is zero as the Company has never paid dividends to common shareholders and does not currently
anticipate paying any in the foreseeable future.
The following table provides the weighted average fair value of options granted to directors and employees and the
related assumptions used in the Black-Scholes model:
Weighted average fair value of options granted
Expected term
Expected volatility
Expected dividends
Risk free interest rate
Year Ended
$
$
October 31, 2018
1.61
5.35-6.51 years
91.14%-100.34%
0%
1.81%-3.16%
October 31, 2017
6.36
5.50-6.50 years
107.07%-110.93%
0%
1.26%-1.58%
Total compensation cost related to the Company’s outstanding stock options, recognized in the statement of operations
for the years ended October 31, 2018 and 2017 was approximately $3.7 million and $17.2 million, respectively. Included in
compensation expense for the year ended October 31, 2018 is approximately $77,000 recognized as a result of the modification of
certain option agreements associated with two Board members that decided not to run for re-election in March 2018. For the
modified options, the vesting was accelerated and the expiration dates were changed to the earlier of the original expiration date
or March 21, 2023. Included in fiscal 2017 compensation expense is $1.6 million recognized as a result of the modification of
certain option agreements associated with the resignation of the Company’s Chief Executive Officer in July 2017. Pursuant to the
separation agreement all the outstanding options vested immediately and the expiration date was extended until July 5, 2021.
During the year ended October 31, 2018, 2,518,060 options were granted with a total grant date fair value of
approximately $4.1 million. During the year ended October 31, 2017, 556,952 options were granted with a total grant date fair
value of approximately $3.5 million.
As of October 31, 2018, there was approximately $2.3 million of unrecognized compensation cost related to non-vested
stock option awards, which is expected to be recognized over a remaining weighted average vesting period of approximately 2.18
years.
Shares Issued to Consultants
During the year ended October 31, 2017, 165,907 shares of common stock valued at $1.4 million were issued to
consultants for services. The common stock share values were based on the dates the shares vested.
Employee Stock Purchase Plan
The Advaxis, Inc. 2011 Employee Stock Purchase Plan (“2011 ESPP”) was approved by the Company’s stockholders in
September 2011. The 2011 ESPP allowed employees to purchase common stock of the Company at a 15% discount to the market
/
price on designated exercise dates. Employees were eligible to participate in the 2011 ESPP beginning December 30, 2011.
40,000 shares of the Company’s common stock were reserved for issuance under the 2011 ESPP.
F-18
/
During the year ended October 31, 2017, 26,594 shares were issued under the 2011 ESPP and the Company recorded an
expense of approximately $80,000. As of October 31, 2017, no shares of Company’s common stock remained available for
issuance under the ESPP. 10,681 shares purchased under the 2011 ESPP during year ended October 31, 2017 were issued during
the year ended October 31, 2018.
The Advaxis, Inc. 2015 Employee Stock Purchase Plan (“2015 ESPP”) was approved by the Company’s shareholders on
March 21, 2018. The 2015 ESPP allows employees to purchase common stock of the Company at a 15% discount to the market
price on designated exercise dates. Employees were eligible to participate in the 2015 ESPP beginning May 1, 2018. 1,000,000
shares of the Company’s Common stock are reserved for issuance under the 2015 ESPP.
During the year ended October 31, 2018, 28,490 shares were issued under the ESPP and the Company recorded an
expense of approximately $7,000. As of October 31, 2018, 971,510 shares of Company’s common stock remain available for
issuance under the 2015 ESPP.
9. COLLABORATION AND LICENSING AGREEMENTS
OS Therapies LLC
On September 4, 2018, the Company granted a license to OS Therapies for the use of ADXS31-164, also known as
ADXS-HER2, for evaluation in the treatment of osteosarcoma in humans. Under the terms of the license agreement, OST, in
collaboration with the Children’s Oncology Group, will be responsible for the conduct and funding of a clinical study evaluating
ADXS-HER2 in recurrent, completely resected osteosarcoma. Pursuant to the agreement, the Company is to receive an upfront
payment, reimbursement for product supply and other support, clinical, regulatory, and sales-based milestone payments, and
royalties on future product sales.
Amgen
On August 1, 2016, the Company entered into a global agreement (the “Amgen Agreement”) with Amgen for the
development and commercialization of the Company’s ADXS-NEO, a novel, preclinical investigational immunotherapy, using
the Company’s proprietary Listeria monocytogenes attenuated bacterial vector which activates a patient’s immune system to
respond against unique mutations, or neoepitopes, contained in and identified from an individual patient’s tumor. Under the terms
of the Amgen Agreement, Amgen received an exclusive worldwide license to develop and commercialize ADXS-NEO. On
December 10, 2018, the Company received a written notice of termination from Amgen with respect to the Amgen Agreement.
The termination is effective as of February 8, 2019. The Company is currently evaluating its options relating to its ADXS-NEO
program. Pursuant to the terms of the Amgen Agreement, upon Amgen’s termination, the license to Amgen will terminate and the
Company will regain worldwide rights for the development and commercialization of its ADXS-NEO program. In addition,
Amgen will have certain obligations as set forth in the Amgen Agreement, including promptly deleting or destroying any
materials related to the development or manufacturing of the ADXS-NEO program.
Amgen had previously made an upfront payment to Advaxis of $40 million and purchased $25 million of Advaxis
common stock. Amgen funded the clinical development and commercialization of ADXS-NEO and Advaxis retained
manufacturing responsibilities. Advaxis and Amgen had collaborated through a joint steering committee for the development and
commercialization of ADXS-NEO. Advaxis was eligible to receive future contingent payments based on development, regulatory
and sales milestone payments of up to $475 million and high single digit to double digit royalty payments based on worldwide
sales by Amgen.
The Company identified the following performance obligations under the agreement: 1) the license, 2) the obligation to
provide research activities, 3) the obligation to provide clinical supplies, 4) the obligation to perform regulatory functions and 5)
the obligation to participate on a Joint Steering Committee.
F-19
/
The Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize
the total consideration of the agreement. The Company determined that none of the deliverables have standalone value; all of
these obligations will be delivered throughout the estimated period of performance and therefore are accounted for as a single unit
of accounting. Accordingly, the Company recorded the $40 million upfront payment as deferred revenue on the balance sheet and
will recognize revenue on a straight-line basis over the estimated period of performance. Changes in the estimated period of
performance will be accounted for prospectively as a change in estimate. During the years ended October 31, 2018 and 2017, the
Company recognized revenue from the Amgen Agreement of approximately $5.8 million and $11.8 million, respectively, related
to amortization of the upfront fees. On December 10, 2018, the Company received a written notice of termination of the Amgen
Agreement (see Note 9).
In connection with the Amgen Agreement, Amgen purchased directly from Advaxis 3,047,446 shares of the Company’s
common stock, at approximately $8.20 per share (representing a purchase at market using a 20 day VWAP methodology). The
gross proceeds to Advaxis from the sale of the shares was approximately $25 million.
The Company considered the provisions of the research and development and collaboration guidance in determining
how to recognize the clinical development payments to be received from Amgen. The Company determined the clinical
development payments should be accounted for within the scope of collaboration arrangement accounting guidance. As a result,
the Company accounted for the clinical development payments as a reduction of research and development expenses in the
statement of operations. During the years ended October 31, 2018 and 2017, the Company recorded reductions in research and
development expenses of approximately $5.8 million and $7.5 million, respectively, pertaining to the reimbursement of clinical
development payments.
Especificos Stendhal SA de CV
On February 3, 2016, the Company entered into a Co-Development and Commercialization Agreement (the “Stendhal
Agreement”) with Especificos Stendhal SA de CV (“Stendhal”), for Advaxis’ lead Lm Technology™ immunotherapy,
axalimogene filolisbac, in HPV-associated cancers. Under the terms of the Stendhal Agreement, Stendhal agreed to pay $10
million (“Support Payments”) towards the expense of AIM2CERV over the duration of the trial. Stendhal also agreed work with
the Company to complete the clinical trial of axalimogene filolisbac in Mexico, Brazil, Colombia and other investigational sites
in Latin American countries. Stendhal further agreed to manage and to be responsible for the costs associated with the regulatory
approval process, promotion, commercialization and market access for axalimogene filolisbac in these markets. Under the terms
of the Agreement, upon approval and commercialization of axalimogene filolisbac, Advaxis and Stendhal would share profits on
a pre-determined basis.
The Company considered the provisions of the research and development and collaboration guidance in determining
how to recognize the Support Payments to be received from Stendhal. The Company determined the Stendhal Agreement should
be accounted for within the scope of collaboration arrangement accounting guidance. As a result, the Company accounted for the
support payments as a reduction of research and development expenses in the statement of operations. During the year ended
October 31, 2017, the Company reached the annual project milestones and received a $3,000,000 Support Payment from
Stendhal. In September 2018, the Company received a Notice of Arbitration from Stendhal relating to the Stendhal Agreement,
see Note 10.
Merck & Co., Inc.
On August 22, 2014, the Company entered into a Clinical Trial Collaboration and Supply Agreement (the “Merck
Agreement”) with Merck, pursuant to which the parties are collaborating on a Phase 1/2 dose-determination and safety trial. The
Phase 1 portion of the trial evaluated the safety of our Lm -LLO based immunotherapy for prostate cancer, ADXS-PSA (the
“Advaxis Compound”) as monotherapy and in combination with KEYTRUDA® (pembrolizumab), Merck’s humanized
monoclonal antibody against PD-1, (the “Merck Compound”) and has determined a recommended Phase 2 combination dose. The
Phase 2 portion is evaluating the safety and efficacy of the Advaxis Compound in combination with the Merck Compound. Both
phases of the trial are in patients with previously treated metastatic castration-resistant prostate cancer. A joint development
committee, comprised of equal representatives from both parties, is responsible for coordinating all regulatory and other activities
under, and pursuant to, the Merck Agreement.
F-20
/
Each party is responsible for their own internal costs and expenses to support the trial, while the Company will be
responsible for all third party costs of conducting the trial. Merck is responsible for manufacturing and supplying the Merck
Compound. The Company is responsible for manufacturing and supplying the Advaxis Compound. The Company is the sponsor
of the trial and hold the IND related to the trial.
All data and results generated under the trial (“Collaboration Data”) will be jointly owned by the parties, except that
ownership of data and information generated from sample analysis to be performed by each party on its respective compound will
be owned by the party conducting such testing. All rights to all inventions and discoveries, which claim or cover the combined
use of the Advaxis Compound and the Merck Compound shall belong jointly to the parties. Inventions and discoveries relating
solely to the Advaxis Compound, or a live attenuated bacterial vaccine, shall be the exclusive property of us. Inventions and
discoveries relating solely to the Merck Compound, or a PD-1 antagonist, shall be the exclusive property of Merck.
Enrollment for both phases of the clinical trial is complete. The Company anticipates providing an update on survival
rates along with correlative biomarker work in the first quarter of 2019.
During the years ended October 31, 2018 and 2017, the Company incurred approximately $2.4 million and $2.9 million,
respectively, in expenses pertaining to the Merck agreement, and such expenses were a component of research and development
expenses in the statement of operations.
MedImmune/AstraZeneca
On July 21, 2014, the Company entered into a Clinical Trial Collaboration Agreement (the “MedImmune Agreement”)
with MedImmune, the global biologics research and development arm of AstraZeneca, pursuant to which the parties initiated a
Phase 1/2 clinical trial in the United States to evaluate the safety and efficacy of MedImmune’s investigational anti-PD-L1
immune checkpoint inhibitor, MEDI4736, in combination with our investigational Lm -LLO cancer immunotherapy, axalimogene
filolisbac, as a combination treatment for patients with advanced, recurrent or refractory cervical cancer and HPV-associated head
and neck cancer. A joint steering committee, composed of equal representatives from both parties, is responsible for various
matters associated with the collaboration, including protocol approval, as well as reviewing and monitoring the progress of the
trial. In November 2018, the Company announced that it will not continue enrollment of this study. Subjects will enter a 3-year
Lm surveillance period beginning at the completion of study treatment or at the time of study discontinuation.
MedImmune is responsible for providing MEDI4736 at no cost, as well as costs related to the proprietary assays
performed by MedImmune or a third party on behalf of MedImmune. The Company is the sponsor of the trial and is responsible
for the submission of all regulatory filings to support the trial, the negotiation and execution of the clinical trial agreements
associated with each trial site, and the packaging and labelling of the Advaxis and MedImmune product candidates used in the
trial and the costs associated therewith. For a period beginning upon the completion of the trial and the receipt by MedImmune of
the last final report for the trial and ending one hundred twenty (120) days thereafter (unless extended), MedImmune will be
granted first right to negotiate in good faith in an attempt to enter into an agreement with us with respect to the development,
regulatory approval and commercialization of axalimogene filolisbac and MEDI4736 to be used in combination with each other
for the treatment or prevention of cancer. Neither party is obligated to enter into such an agreement. In the event the parties do not
enter an agreement and the Company obtain regulatory approval for axalimogene filolisbac in combination with any PD-1
antibody or PD-L1 antibody, the Company shall pay MedImmune a royalty obligation and one-time payment.
All intellectual property rights made, conceived or generated through the clinical trials that relate solely to a
MedImmune development product shall be owned solely by MedImmune. All intellectual property rights made, conceived or
generated through the clinical trials that relate solely to an Advaxis development product shall be owned solely by us. All
intellectual property rights made, conceived or generated through the clinical trials that relate to the combination of one or more
MedImmune development product and one or more Advaxis development product shall be jointly owned by both parties;
provided, however that in the event the parties do not enter into a clinical development and commercialization agreement, the
Company will not exploit, commercialize or license the joint inventions, except for the performance of its obligations under the
MedImmune Agreement. MedImmune has the sole right to prosecute and enforce all patents and other intellectual property rights
covering all joint inventions and all associated costs will be shared by the parties.
The MedImmune Agreement shall remain in effect until the earlier of (i) permitted termination, (ii) the parties entering
into a clinical development and commercialization agreement or expiration of the negotiation period (unless extended), except
with respect to rights that survive termination. Either party may terminate the MedImmune Agreement upon thirty (30) days
written notice upon material breach of the other party, unless the breach is cured in such period or reasonable actions to cure the
breach are initiated and pursued (if the breach is not capable of being cured during the 30-day notice period). In addition, either
party may terminate the MedImmune Agreement immediately if the party determines in good faith that the trials may
unreasonably affect the safety of trial subjects.
F-21
/
During the years ended October 31, 2018 and 2017, the Company incurred approximately $2.7 million and $2.8 million,
respectively, in expenses pertaining to the MedImmune agreement, and such expenses were a component of research and
development expenses in the statement of operations.
Aratana Therapeutics
On March 19, 2014, the Company and Aratana entered into a definitive Exclusive License Agreement (the “Aratana
Agreement”). Pursuant to the Agreement, Advaxis granted Aratana an exclusive, worldwide, royalty-bearing, license, with the
right to sublicense, certain Advaxis proprietary technology that enables Aratana to develop and commercialize animal health
products that will be targeted for treatment of osteosarcoma and other cancer indications in animals. Under the terms of the
Aratana Agreement, Aratana paid an upfront payment to the Company, of $1 million. As this license has stand-alone value to
Aratana (who has the ability to sublicense) and was delivered to Aratana, upon execution of the Aratana Agreement, the
Company recorded the $1 million payment as licensing revenue during the year ended October 31, 2014. Aratana will also pay
the Company up to an additional $36.5 million based on the achievement of certain milestones with respect to the advancement of
products pursuant to the terms of the Aratana Agreement. In addition, Aratana may pay the Company an additional $15 million in
cumulative sales milestones pursuant to the terms of the Aratana Agreement.
Advaxis (i) issued and sold 306,122 shares of Advaxis’ common stock to Aratana at a price of $4.90 per share, which
was equal to the closing price of the common stock on the NASDAQ Capital Market on March 19, 2014, and (ii) issued a ten-
year warrant to Aratana giving Aratana the right to purchase up to 153,061 additional shares of Advaxis’ common stock at an
exercise price of $4.90 per share. In connection with the sale of the common stock and warrants, Advaxis received aggregate net
proceeds of $1,500,000. Aratana exercised all of its 153,061 warrants. As a result, no warrants remain outstanding under this
agreement.
During the year ended October 31, 2018, the USDA’s Center for Veterinary Biologics granted Aratana conditional
approval for its canine osteosarcoma vaccine using Advaxis’ technology. For the year ended October 31, 2018, Advaxis
recognized royalty revenue totaling approximately $5,000 from Aratana’s sales of the canine osteosarcoma vaccine.
Global BioPharma Inc.
On December 9, 2013, the Company entered into an exclusive licensing agreement for the development and
commercialization of axalimogene filolisbac with Global BioPharma, Inc. (“GBP”), a Taiwanese based biotech company funded
by a group of investors led by Taiwan Biotech Co., Ltd (TBC).
GBP is planning to conduct a randomized Phase 2, open-label, controlled trial in HPV-associated NSCLC in patients
following first-line induction chemotherapy. GBP has obtained Taiwanese regulatory approval for this trial and plans to initiate
this trial in 2019. This trial will be fully funded exclusively by GBP. GBP will continue to explore the use of our lead product
candidate in several other indications including head and neck, and anal cancer. GBP also plans to conduct registration trials with
axalimogene filolisbac for the treatment of advanced cervical cancer.
GBP will pay Advaxis event-based financial milestones, an annual license fee, and annual net sales royalty payments in
the high single to double digits. In addition, as an upfront payment, GBP made an investment in Advaxis of $400,000 by
purchasing from the Company 108,724 shares of its common stock at a price of $3.68 per share, GBP also received 100,000
warrants at an exercise price of $5.52 which expire in December 2018. GBP exercised all of its 100,000 warrants. As a result no
warrants remain outstanding under this agreement.
GBP will be responsible for all clinical development and commercialization costs in the GBP territory. GBP will also
reimburse Advaxis $2.25 million toward AIM2CERV. GBP is committed to establishing manufacturing capabilities for its own.
Under the terms of the agreement, the Company will exclusively license the rights of axalimogene filolisbac to GBP for the Asia,
Africa, and former USSR territory, exclusive of India and certain other countries, for all HPV-associated indications. Advaxis will
retain exclusive rights to axalimogene filolisbac for the rest of the world.
F-22
/
During each of the years ended October 31, 2018 and 2017, the Company recognized revenue of $250,000 for annual
license fees.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Knoll
On August 21, 2015, Knoll Capital Management L.P. (“KCM”) filed a complaint against the Company in the Delaware
Court of Chancery. The complaint alleged the existence of an oral agreement for the purchase by Knoll from the Company of
1,666,666.67 shares of Company stock at a price of $3.00 per share. KCM alleged that the Company breached this alleged
agreement and sought specific performance or, alternatively, money damages for breach of contract. KCM served the Company
with the complaint on August 31, 2015, and then served an amended complaint on October 16, 2015. The Company moved to
dismiss the amended complaint on October 26, 2015 and that motion was denied on January 29, 2016. The Company filed an
answer to the amended complaint on February 12, 2016.
In lieu of continuing to unnecessarily incur litigation expenses, on April 27, 2017, the Company settled the matter for a
non-material amount, predominately reimbursed by the Company’s insurance, and the parties entered into a definitive confidential
settlement agreement. The Company expressly denies any admission or wrongdoing and the settlement was entered into solely for
the purpose of avoiding the burden, inconvenience, and expense of further litigation. On May 11, 2017, following resolution of
the matter by the parties, the Court granted a Stipulation of Dismissal with Prejudice.
Bono
On August 20, 2015, a derivative complaint was filed by a purported Company stockholder in the United States District
Court for the District of New Jersey styled David Bono v. O’Connor, et al., Case No. 3:15-CV-006326-FLW-DEA (D.N.J. Aug.
20, 2015) (the “Bono Action”). The complaint was based on general allegations related to certain stock options granted to the
individual defendants and generally alleged counts for breaches of fiduciary duty and unjust enrichment. The complaint also
alleged additional claims for violation of Section 14(a) of the Securities Exchange Act of 1934 and for waste of corporate assets.
The complaint sought damages and costs of an unspecified amount, disgorgement of compensation obtained by the individual
defendants, and injunctive relief.
Defendants filed a motion to dismiss the Bono Action. On May 23, 2016, the Court issued an opinion and order granting
in part and denying in part defendants’ motion to dismiss. On October 5, 2016, the Court denied plaintiff’s motion for
reconsideration of its May 23 order. On April 13, 2017, the parties advised the Court that they had reached a tentative agreement
in principle to settle the action, subject to negotiating an award of attorneys’ fees and expenses to plaintiff’s counsel and a
stipulation of settlement, and, ultimately Court approval. The parties subsequently executed the stipulation of settlement on
October 2, 2017. The Court entered an order preliminarily approving the settlement on November 7, 2017. The final fairness
hearing was held January 29, 2018, and the Order and Final Judgment approving the settlement and dismissing the action with
prejudice was entered on January 29, 2018. This matter is now concluded.
Stendhal
On September 19, 2018, Stendhal filed a Demand for Arbitration before the International Centre for Dispute Resolution
(Case No. 01-18-0003-5013) relating to the Stendhal Agreement. In the demand, Stendhal alleged that (i) the Company breached
the Stendhal Agreement when it made certain statements regarding its AIM2CERV program, (ii) that Stendhal was subsequently
entitled to terminate the Agreement for cause, which it did so at the time and (iii) that the Company owes Stendhal damages
pursuant to the terms of the Stendhal Agreement. Stendhal is seeking to recover $3 million paid to the Company in 2017 as
support payments for the AIM2CERV clinical trial along with approximately $0.3 million in expenses incurred. Stendhal is also
seeking fees associated with the arbitration and interest. The Company has answered Stendhal’s Demand for Arbitration, and
denied that it breached the Stendhal Agreement. The Company also alleges that Stendhal breached its obligations to the Company
by, among other things, failing to make support payments that became due in 2018 and that Stendhal therefore owes the Company
$3 million. While, the arbitration is still in its early stages. the Company intends to continue to vigorously defend itself against
this matter. At this time, we are unable to predict the likelihood of an unfavorable outcome.
F-23
/
Corporate Office & Manufacturing Facility Lease
The Company leases its corporate office and manufacturing facility under an operating lease expiring in November 2025.
Future minimum payments under the Company’s operating leases are as follows (in thousands):
Year ended October 31,
2019
2020
2021
2022
2023
Thereafter
Total
$
$
1,107
1,233
1,318
1,369
1,395
2,983
9,405
Rent expense for each of the years ended October 31, 2018 and 2017 was approximately $1.2 million.
11. INCOME TAXES:
The income tax provision (benefit) consists of the following (in thousands):
Federal
Current
Deferred
State and Local
Current
Deferred
Change in valuation allowance
Income tax provision (benefit)
October 31, 2018
October 31, 2017
$
$
- $
22,325
-
(5,449)
(16,876)
- $
-
(34,296)
(4,453)
(1,124)
35,420
(4,453)
The Company has U.S. federal net operating loss carryovers (“NOLs”) of approximately $265.8 million and $187.4
million at October 31, 2018 and 2017 respectively, available to offset taxable income which expire beginning in 2023. If not used,
these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership
change as determined under the regulations. During the years ended October 31, 2018 and 2017, the Company performed a
detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating
loss carryovers. From the entire federal NOL of $290.6 million as of October 31, 2018, approximately $265.8 million is available
for immediate use based on Internal Revenue Code Section 382 analysis. The NOL and the deferred tax asset table below does
not include approximately $24.8 million of NOL’s that may expire unused. The Company also has New Jersey State Net
Operating Loss carryovers of approximately $129.2 million as of October 31, 2018 available to offset future taxable income
through 2038.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
future generation for taxable income during the periods in which temporary differences representing net future deductible
amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. After consideration of all the information available, management
believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established
a full valuation allowance.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax
Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and significant changes to the U.S. tax code including, but not
limited to, a change in the federal rate from 34% to 21%. As a result of the enactment of the legislation, the Company recorded a
one-time reduction to its deferred tax assets of approximately $34.4 million, which was offset by a reduction in the valuation
allowance.
When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily
average rate for the fiscal year of enactment. As a result of the Tax Act, Advaxis has calculated a blended U.S. federal statutory
corporate income tax rate of approximately 23% for the year ended October 31, 2018 and applied this rate in computing the
income tax provision for year ending October 31, 2018. The blended U.S. federal statutory corporate income tax rate of 23% is
the weighted daily average rate between the pre-enactment U.S. federal statutory tax rate of 34% applicable to the Company’s
/
2018 fiscal year prior to the Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable to the 2018
fiscal year thereafter. Advaxis expects the U.S. federal statutory rate to be 21% for fiscal years beginning after October 31, 2018.
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized
in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present,
and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences
between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the
interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward
or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future
obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
F-24
/
If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified
as other expense in the statement of operations. Penalties would be recognized as a component of general and administrative
expenses in the statement of operations.
No interest or penalties on unpaid tax were recorded during the years ended October 31, 2018 and 2017, respectively. As
of October 31, 2018 and 2017, no liability for unrecognized tax benefits was required to be reported. The Company does not
expect any significant changes in its unrecognized tax benefits in the next year.
The Company files tax returns in the U.S. federal and state jurisdictions and is subject to examination by tax authorities
beginning with the year ended October 31, 2014.
The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the
following (in thousands):
Deferred Tax Assets
Net operating loss carryovers
Stock-based compensation
Research and development credits
Deferred revenue
Other deferred tax assets
Total deferred tax assets
Valuation allowance
Deferred tax asset, net of valuation allowance
Deferred Tax Liabilities
Other deferred tax liabilities
Total deferred tax liabilities
Net deferred tax asset (liability)
Years Ended
October 31, 2018
October 31, 2017
$
$
$
$
$
$
65,002 $
12,081
6,843
5,247
587
89,760 $
(87,862)
1,898 $
(1,898) $
(1,898) $
- $
66,681
21,921
7,293
9,775
1,515
107,185
(104,738)
2,447
(2,447)
(2,447)
-
The expected tax (expense) benefit based on the statutory rate is reconciled with actual tax expense benefit as follows:
US Federal statutory rate
State income tax, net of federal benefit
Permanent differences
Research and development credits
Income tax benefit from sale of New Jersey NOL carryovers
Change in valuation allowance
Tax Cuts and Jobs Act
Other
Income tax (provision) benefit
Sale of Net Operating Losses (NOLs)
Years Ended
October 31, 2018
October 31, 2017
23.17%
8.19
1.22
(0.38)
-
25.37
(53.93)
(3.64)
0.00%
34.00%
1.15
(2.30)
2.36
4.55
(36.20)
-
0.99
4.55%
The Company was eligible to receive cash from the sale of its Net Operating Losses under the State of New Jersey NOL
Transfer Program. In January 2018, the Company received a net cash amount of approximately $4.5 million from the sale of its
state NOLs and research and development tax credits for the year ended October 31, 2016. Following the receipt of the NOL and
research and development tax credit for the year ending October 31, 2016, the Company reached the limit under the NJ NOL
program.
F-25
/
12. SHAREHOLDERS’ EQUITY:
At-the-Market Transactions
During January 2018, the Company sold 881,629 shares of its common stock at-the-market transactions resulting in net
proceeds of approximately $2.7 million. Additionally, in May 2017 and June 2017, the Company sold a total of 92,145 shares of
its common stock at-the-market transactions resulting in net proceeds of approximately $0.7 million.
Public Offerings
During February 2018, the Company closed on an underwritten public offering of 10,000,000 shares of the Company’s
common stock in a public offering at $2.00 per share, for total gross proceeds of $20 million. After deducting the underwriting
discounts and commissions and other offering expenses, the net proceeds from the offering were approximately $18.4 million. In
addition, pursuant to the underwriting agreement, the Company granted the underwriters an option, exercisable for 30 days, to
purchase up to an additional 807,697 shares of common stock. The sale of the Offered Shares was registered pursuant to a
Registration Statement (No. 333-216008) on Form S-3, as amended, which was filed by the Company with the Securities and
Exchange Commission on March 17, 2017 and declared effective on March 20, 2017.
In September 2018, the Company closed on an underwritten public offering of 16,666,666 shares of its common stock
and warrants to purchase up to 14,166,666 shares of common stock at a public offering price of $1.20, for gross proceeds of $20
million. Each share of common stock was sold together in a fixed combination with a warrant to purchase 0.85 shares of common
stock. The warrants are exercisable immediately, expire six years from the date of issuance and have an exercise price of $1.50
per share, subject to anti-dilution adjustments (see Note 7). After deducting the underwriting discounts and commissions and
other offering expenses, the net proceeds from the offering were approximately $18.2 million. The shares of common stock were
sold pursuant to an effective shelf registration statement on Form S-3 (No. 333- 226988) filed with the Securities and Exchange
Commission on August 23, 2018 and declared effective on August 30, 2018.
13. FAIR VALUE
The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance
describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value which are the following:
● Level 1 — Quoted prices in active markets for identical assets or liabilities.
● Level 2— Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by
observable market data or substantially the full term of the assets or liabilities.
● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the value of
the assets or liabilities.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of October
31, 2018. The Company had no assets and liabilities carried at fair value measured on a recurring basis as of October 31, 2017:
October 31, 2018
Level 1
Level 2
Level 3
Total
Common stock warrant liability, warrants
exercisable at $1.50 through September 2024
-
- $
6,517 $
6,517
The following table sets forth a summary of the changes in the fair value of the Company’s warrant liabilities:
Beginning balance
Issuance of warrants
Change in fair value
Ending Balance
14. EMPLOYEE BENEFIT PLAN
$
October 31, 2018
-
9,917
(3,400)
6,517
/
The Company sponsors a 401(k) Plan. Employees become eligible for participation upon the start of employment.
Participants may elect to have a portion of their salary deferred and contributed to the 401(k) Plan up to the limit allowed under
the Internal Revenue Code. The Company makes a matching contribution to the plan for each participant who has elected to make
tax-deferred contributions for the plan year. The Company made matching contributions which amounted to approximately $0.4
million and $0.4 million for the years ended October 31, 2018 and 2017, respectively. These amounts were charged to the
statement of operations. The employer contributions vest immediately.
15. SUBSEQUENT EVENTS
Option Grants
On November 5, 2018, the Company granted to executives and non-executive directors 720,000 and 130,000 options,
respectively, with an exercise price of $0.54. The options vest annually in three equal installments beginning on the first
anniversaries of the grant date.
Amgen Agreement Termination
On December 10, 2018, the Company received a written notice of termination from Amgen with respect to the Amgen
Agreement. The termination is effective as of February 8, 2019. The Company’s ADXS-NEO study is currently enrolling patients
and the Company will evaluate whether to re-partner the ADXS-NEO program.
Pursuant to the terms of the Amgen Agreement, upon Amgen’s termination, the license to Amgen will terminate and the
Company will regain worldwide rights for the development and commercialization of its ADXS-NEO program. In addition,
Amgen will have certain obligations as set forth in the Amgen Agreement, including promptly deleting or destroying any
materials related to the development or manufacturing of the ADXS-NEO program. During the fiscal years ended October 31,
2018 (unaudited) and 2017, the Company recorded reimbursements of approximately $5.8 million and $7.5 million, respectively,
relating to the Amgen Agreement
F-26
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of Advaxis, Inc. on Form S-8 [File Nos. 333-130080
and 333-217218] and Form S-3 [File Nos. 333-194009, 333-203497 and 333-216008] of our report, which includes an
explanatory paragraph as to the Company’s ability to continue as a going concern, dated January 11, 2019, with respect to our
audits of the financial statements of Advaxis, Inc. as of October 31, 2018 and for the years ended October 31, 2018 and 2017 and
our report dated January 11, 2019 with respect to our audit of the effectiveness of internal control over financial reporting of
Advaxis, Inc. as of October 31, 2018, which reports are included in this Annual Report on Form 10-K of Advaxis, Inc. for the
year ended October 31, 2018.
Our report on the effectiveness of internal control over financial reporting expressed an adverse opinion because of the existence
of a material weakness.
/s/ Marcum LLP
Marcum LLP
New York, NY
January 11, 2019
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CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18.U.S.C. 7350
(SECTION 302 OF THE SARBANES OXLEY ACT OF 2002)
EXHIBIT 31.1
I, Kenneth Berlin, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended October 31, 2018 of Advaxis, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
January 11, 2019
/s/ Kenneth Berlin
By:
Name:Kenneth Berlin
Title: President & Chief Executive Officer
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/
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18. U.S.C. 7350
(SECTION 302 OF THE SARBANES OXLEY ACT OF 2002)
EXHIBIT 31.2
I, Molly Henderson, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended October 31, 2018 of Advaxis, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
January 11, 2019
/s/ Molly Henderson
By:
Name:Molly Henderson
Title: Chief Financial Officer, Executive Vice President
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EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Advaxis, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year
ended October 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, the Chief Executive Officer, hereby certifies pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of
the Sarbanes Oxley Act of 2002 that, to the undersigned’s knowledge:
(1) the Report of the Company filed today fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation
of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: January 11, 2019
/s/ Kenneth Berlin
By:
Name:Kenneth Berlin
Title: President & Chief Executive Officer
/
/
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Advaxis, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year
ended October 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, the Chief Financial Officer, hereby certifies pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of
the Sarbanes Oxley Act of 2002 that, to the undersigned’s knowledge:
(1) the Report of the Company filed today fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation
of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: January 11, 2019
/s/ Molly Henderson
By:
Name:Molly Henderson
Title: Chief Financial Officer, Executive Vice President
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