Annual Report 2020
Message to Shareholders
Dear Shareholders,
I hope this letter finds you safe.
Since the first cases of COVID 19 were announced, the company has continued to monitor the situation and adapt
accordingly. When government mandated lock-down was announced, we closed our office and laboratory and
facilitated remote working for staff. As government approved a staged reopening, we too re-opened, though
continued to allow for remote working for staff. COVID-19 has led to delays of our clinical studies due to hospital
restrictions. Regardless of these challenges, our staff has adapted well, and continue to adapt as necessary, given
these challenging times.
We have made the following progress during this challenging environment.
In clinical development:
LDOS001 – A Phase I combination clinical study in non-small cell lung cancer patients (USA)
Topline data report was been presented at ASCO in 2020. Once the U.S. has eased COVID19
restrictions, the clinical database will be locked and eventually reported.
LDOS003 – A Phase II combination clinical study in non-small cell lung cancer patients (Ukraine)
Stage 1 of the Phase II study has been completed, pending close out activities. As previously disclosed,
we will not be moving forward with the second stage of this clinical study, unless we enter into a co-
development partnership with funding from a third-party.
LDOS006 – A Phase Ib/II combination clinical study of L-DOS47 with doxorubicin in advanced pancreatic
cancer patients (USA)
Enrollment for the Phase Ib portion of the study was originally expected to be completed by the end of
calendar 2020 but due to COVID-19, but has now been pushed out to the second quarter of 2021,
pending the timely opening of new clinical sites.
In corporate development:
We started the 2020 fiscal year with a working capital deficiency which continued until August 21, 2019 when
we closed the first of a series of private placements for total gross proceeds of approximately CAD$16 million.
A portion of the private placement financings included a 49.0% disposition of the Company’s holdings in Helix
Immuno-Oncology S.A. (“HIO”).
In June we also announced the receipt of a non-binding agreement from CAIAC Fund Management AG to
divest the Company’s remaining ownership in HIO for gross proceeds of approximately PLN 6.7 million. We
continue to work on closing this transaction.
We have extended our engagement with Deloitte as we expand our partnering, alliance, and licensing
opportunities with major pharmaceutical and biotech companies.
We engaged two U.S. and one Canadian capital markets firms in the year with the goal of raising additional
capital to qualify for a NASDAQ listing.
Despite COVID19, we continue to adapt given the challenging circumstances. For 2021, advancing our L-DOS47
clinical development program; establishing a third- party partnership while raising sufficient capital to qualify for a
Nasdaq listing remain key objectives.
I would like to thank all our staff and shareholders for their continued support during these trying times.
Please stay safe.
Sincerely,
Heman Chao, PhD
Chief Executive Officer
This letter contains certain forward-looking statements. By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. Please refer to the caution regarding Forward-Looking Statements
and Information on page 25 of this Annual Report for a discussion of such risks and uncertainties and the material factors and
assumptions related to these statements.
Consolidated Financial Statements of Helix BioPharma Corp.
Years ended July 31, 2020 and 2019
1
Independent Auditor’s Report
To the shareholders of Helix Biopharma Corp.
Opinion
We have audited the consolidated financial statements of Helix BioPharma Corp. and its subsidiaries
(the “Group”), which comprise the consolidated statements of financial position as at July 31, 2020
and 2019, and the consolidated statements of net loss and comprehensive loss, changes in
shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at July 31, 2020 and 2019 and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the
Group in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the consolidated financial statements, which indicates that the Group
incurred a net loss of $9,174,000 during the year ended July 31, 2020 and, as of that date, the Group's
cash balance of $4,235,000 is insufficient to meet anticipated cash needs for working capital and
capital expenditures through the next twelve months. As stated in Note 1, these events or conditions,
along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may
cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Other Information
Management is responsible for the other information. The other information comprises:
• The information, other than the consolidated financial statements and our auditor’s report
thereon, included in the 2020 Annual Report; and
• The information included in Management Discussion and Analysis for the year ended July 31,
2020.
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information identified above and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
Tel: 905 639 9500 Fax: 905 633 4939 Toll-free: 888 236 2383 www.bdo.ca BDO Canada LLP 3115 Harvester Road, Suite 400 Burlington ON L7N 3N8 Canada BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. 2
We obtained Management Discussion and Analysis and the 2020 Annual Report prior to the date of
this auditor’s report. If, based on the work we have performed on this other information, we conclude
that there is a material misstatement of this other information, we are required to report that fact
in this auditor’s report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with Canadian generally accepted
auditing standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
IBDO 3
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Jamie Barron.
Chartered Professional Accountants, Licensed Public Accountants
Burlington, Ontario
October 29, 2020
IBDO 4
HELIX BIOPHARMA CORP.
Consolidated Statement of Financial Position
In thousands of Canadian dollars
As at July 31, 2020 and 2019
As at:
ASSETS
Current assets
Cash
Accounts receivable (note 9)
Prepaid expenses
Assets held for sale (note 14)
Non-current assets
Property, plant and equipment (note 4)
Right-of-use assets (note 5)
2020
2019
$
$
4,235
180
90
155
4,660
91
155
246
206
290
191
–
687
253
–
253
940
Total assets
$
4,906
$
SHAREHOLDERS’ EQUITY / (DEFICIENCY) AND LIABILITIES
Current liabilities
Accounts payable
Accrued liabilities
Deferred government grant
Lease liabilities (note 5)
Liabilities related to assets held for sale (note 14)
Shareholders’ equity / (deficiency) (note 6)
Equity / (deficiency) attributable to owners of the Company
Non-controlling interest
$
1,416
301
–
159
49
1,925
2,394
587
2,981
$
3,040
1,057
124
–
–
4,221
(3,281)
–
(3,281)
Total liabilities and shareholders’ equity / (deficiency)
$
4,906
$
940
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board of Directors:
/s/ Slawomir Majewski
Slawomir Majewski,
Chair, Board of Directors
/s/ Artur Gabor
Artur Gabor
Chair, Audit Committee
5
HELIX BIOPHARMA CORP.
Consolidated Statement of Net Loss and Comprehensive Loss
Years ended July 31, 2020 and 2019 (In thousands of Canadian dollars, except per share amounts)
2020
2019
Expenses
Research and development (note 11)
Operating, general and administration (note 12)
Results from operating activities before finance items
Finance items
Finance income
Finance expense
Foreign exchange (loss) / gain
Net loss from continuing operations
Net loss from discontinued operations (note 14)
Net loss and total comprehensive loss
Add: Net loss and comprehensive loss
attributable to non-controlling interest
Net loss and total comprehensive loss
attributable to Helix BioPharma Corp.
Loss per common share
Basic and diluted from continuing operations
Basic and diluted from discontinued operations
Basic and diluted - total
$ 5,868
2,748
(8,616)
25
(25)
55
55
(8,561)
(613)
(9,174)
189
$
4,948
1,827
(6,775)
3
(13)
(22)
(32)
(6,807)
(719)
(7,526)
–
$ (8,985)
$ (7,526)
$ (0.07)
–
$
$ (0.07)
$
$
$
(0.07)
–
(0.07)
Weighted average number of common shares used in
the calculation of basic and diluted loss per share
127,712,446
106,645,801
The accompanying notes are an integral part of these consolidated financial statements.
6
HELIX BIOPHARMA CORP.
Consolidated Statement of Changes in Shareholders’ Equity
Years ended July 31, 2020 and 2019 (In thousands of Canadian dollars, except common share and warrant numbers)
Common shares warrants
Share purchase
Amount
Number Amount
Contributed
Number Options surplus
Deficit
Total shareholders’
equity /
(deficiency)
NCI
July 31, 2018
$ 125,565 102,809,579 $13,362 35,078,975 $ 683 $22,868 $(164,005) $ –
$ (1,527)
Net loss for the period
Common stock, issued
Warrants, issued
Warrants, expired unexercised
Warrants exercised
Stock-based compensation
Options, exercised
Options, cancelled
Options, expired unexercised
–
3,967
–
–
–
–
–
–
–
–
8,415,922
–
–
–
–
–
–
–
–
–
–
–
1,444 8,415,922
(122,000)
–
–
–
–
–
(43)
–
–
–
–
–
–
–
–
–
–
361
–
–
(404)
–
–
–
43
–
–
–
–
404
(7,526)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7,526)
3,967
1,444
–
–
361
–
–
–
July 31, 2019
$ 129,532 111,225,501 $14,763 43,372,897
$ 640 $23,315 $(171,531) $ –
$ (3,281)
Net loss for the period
Sale of interest in subsidiary
Common stock, issued
Warrants, issued
Warrants, expired unexercised
Warrants exercised
Stock-based compensation
Options, expired unexercised
–
–
–
–
7,725 21,707,516
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,459 21,707,516
–
–
–
–
–
–
–
–
–
–
–
–
–
–
471
(220)
–
2,005
–
–
–
–
–
220
(8,985)
–
–
–
–
–
–
–
(189)
776
–
–
–
–
–
–
(9,174)
2,781
7,725
4,459
–
–
471
–
July 31, 2020
$ 137,257 132,933,017 $19,222 65,080,413
$ 891 $25,540 $ (180,516) $ 587
$ 2,981
The accompanying notes are an integral part of these consolidated financial statements.
7
HELIX BIOPHARMA CORP.
Consolidated Statement of Cash Flows
Years ended July 31, 2020 and 2019 (In thousands of Canadian dollars)
Cash flows from operating activities
Net loss from continuing operations
Adjustments, to net cash provided by operations:
Items not involving cash:
Amortization of property, plant and equipment
Amortization of right-of-use property
Stock-based compensation
Foreign exchange gain
Change in non-cash working capital:
Accounts receivable
Prepaid expenses
Accounts payable
Accrued liabilities
Cash from / (used) in operating activities from continuing operations
Cash from / (used) in operating activities from discontinued operations
Net cash used in operating activities
Cash flows from financing activities
Proceeds from the issuance of common shares and
share purchase warrants, net of issue costs
Lease liability payments
Cash from / (used) in financing activities from continuing operations
Cash from / (used) in financing activities from discontinued operations
Net cash provided by financing activities
Cash flows from investing activities
Purchases of property, plant, and equipment
Proceeds, net of cost, from the partial sale of the Polish subsidiary (note 12)
Cash from / (used) in investing activities from continuing operations
Cash from / (used) in investing activities from discontinued operations
Net cash from / (used) by investing activities
Foreign exchange gain / (loss) on cash
Net increase / (decrease) in cash
Cash, beginning of period
Cash, end of period
2020
2019
$
(8,561)
$
(6,807)
56
155
471
(55)
61
92
(1,545)
(719)
(10,045)
(781)
(10,826)
12,185
(151)
12,034
1,062
13,096
(16)
1,720
1,704
–
1,704
55
56
–
361
22
29
(91)
1,085
401
(4,944)
(601)
(5,545)
5,411
–
5,411
–
5,411
(2)
–
(2)
(2)
(4)
(22)
$
4,029
206
$
4,235
$
(160)
366
206
$
The accompanying notes are an integral part of these consolidated financial statements.
8
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Helix BioPharma Corp. (the “Company”), incorporated under the Canada Business Corporations Act, is an immune-oncology
company primarily focused in the areas of cancer prevention and treatment. The Company has funded its research and
development activities, mainly through the issuance of common shares and warrants. The Company expects to incur additional
losses and therefore will require additional financial resources, on an ongoing basis. It is not possible to predict the outcome of
future research and development activities or the financing thereof.
1. Basis of presentation and going concern
These consolidated financial statements have been prepared on a going-concern basis, which assumes that the Company will
continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the
normal course of operations. The Company's ability to continue as a going concern is dependent mainly on obtaining additional
financing. The Company does not have sufficient cash to meet anticipated cash needs for working capital and capital expenditures
through the next twelve months.
The Company reported a consolidated net loss and total comprehensive loss of $9,174,000 for the fiscal year ended July 31,
2020 (July 31, 2019 - $7,526,000). As at July 31, 2020 the Company had working capital of $2,735,000, shareholders’ equity of
$2,981,000, a deficit of $180,516,000. As at July 31, 2019 the Company had a working capital deficiency of $3,534,000,
shareholders’ deficiency of $3,281,000 and a deficit of $171,531,000. The Company will require additional financing in the
immediate near term and in the future to see the current research and development initiatives through to completion. There can
be no assurance however, that additional financing can be obtained in a timely manner, or at all.
Not raising sufficient additional financing on a timely basis may result in delays and possible termination of all or some of the
Company’s research and development initiatives, and as a result, may cast significant doubt as to the ability of the Company to
operate as a going concern and accordingly, the appropriateness of the use of the accounting principles applicable to a going
concern. These consolidated financial statements do not include any adjustments to the carrying amount and classification of
reported assets, liabilities and expenses that might be necessary should the Company not be successful in its aforementioned
initiatives. Any such adjustments could be material. The Company cannot predict whether it will be able to raise the necessary
funds it needs to continue as a going concern.
Statement of compliance
The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International
Financial Reporting Interpretation Committee.
The consolidated financial statements of the Company were approved and authorized for issue by the Board of Directors on
October 28, 2020.
Use of estimates and critical judgments
The preparation of the Company’s financial statements requires management to make critical judgments, estimates and assumptions
that affect the reported amounts of expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting
date. On an ongoing basis, management evaluates its judgments, estimates and assumptions using historical experience and
various other factors it believes to be reasonable under the given circumstances. Actual outcomes may differ from these
estimates that could require a material adjustment to the reported carrying amounts in the future.
The Company has also assessed the impact of COVID-19 on estimates and critical judgements. Although the Company expects
COVID-19 related disruptions to continue into the Company’s fiscal 2021 year, the Company believes that the long-term estimates
and assumptions do not require significant revisions. Although the Company determined that no significant revisions to such
estimates, judgements or assumptions were required, the pandemic is fluid and given the inherent uncertainty at this time,
revisions may be required in future periods to the extent that the negative impacts on the Company’s business operations arising
from COVID-19 continue or become worse. Any such revision could result in a material impact on the Company’s financial
performance and financial condition.
The most significant critical estimates and judgments made by management include the following:
a) Going Concern
Significant judgments related to the Company’s ability to continue as a going concern are disclosed in the first paragraph
above in Note 1.
b) Clinical study expenses
Clinical study expenses are accrued based on services received and efforts expanded pursuant to contracts with contract research
organizations (“CROs”), consultants, clinical study sites and other vendors. In the normal course of business, the Company
9
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
contracts with third parties to perform various clinical study activities. The financial terms of these agreements vary from contract
to contract and are subject to negotiations that may result in uneven payment outflows. Payments under the contracts depend on
various factors such as the achievement of certain events, the successful enrolment of patients or the completion of portions of
the clinical study and/or other similar conditions. The Company determines the accruals by reviewing contracts, vendor
agreements and purchase orders, and through discussions with internal personnel and external providers as to the progress or
stage of completion of the clinical studies or services and the agreed-upon fee to be paid for such services. However, actual costs
and timing of the Company’s clinical studies is uncertain, subject to risk and may change depending upon a number of factors,
including the Company’s clinical development plans and trial protocols.
c) Valuation of share-based compensation and warrants
Management measures the costs for share-based compensation and warrants using market-based option valuation techniques.
Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility
of the share price, expected dividend yield, future employee turnover rates, a n d future exercise behaviours. Such estimates
and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of share-based payments
and warrants.
d)
Income taxes
Deferred tax assets, including those arising from unutilized tax losses, require management to assess
the likelihood that the
Company will generate future taxable income in future years in order to utilize any deferred tax asset which has been
recognized. Estimates of future taxable income are based on forecasted cash flows. At the current statement of financial position
date, no deferred tax assets have been recognized in these financial statements.
e)
Impairment of long-lived assets
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the
carrying value of the asset may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the
relevant asset or cash-generating unit). An impairment loss is recognized for the amount by which the asset’s carrying amount
exceeds its recoverable amount. Management evaluates impairment losses for potential reversals when events or circumstances
warrant such consideration.
Functional and presentation currency
The functional and presentation currency of the Company is the Canadian dollar.
2. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries listed below. Control is achieved
when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is acquired by the Company. Inter-company
transactions and balances are eliminated upon consolidation. They are de-consolidated from the date that control by the Company
ceases. The consolidated financial statements include the assets and liabilities and results of operations of all subsidiaries after
elimination of intercompany transactions and balances.
The Company’s subsidiaries as at July 31, 2020 are as follows:
Incorporation Date
Helix Immuno-Oncology S.A. (“HIO”)
July 6, 2013
Jurisdiction
Poland
Ownership
42.51%
As at July 31, 2020, the Company’s Chairman and Chief Executive Officer hold two of the three board seats of HIO. In addition,
another board member of the Company is Chief Executive Officer of HIO. As a result, the Company has fully consolidated HIO in
these consolidated financial statements.
During the fiscal year, the Company dissolved its interest in its previously wholly owned subsidiaries Helix BioPharma Inc.,
incorporated in the USA and Helix Product Development (Ireland) Limited, incorporated in Ireland.
10
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Non-controlling interests in the results and equity of a Company subsidiary are shown separately in the consolidated statements
of financial position, net loss and comprehensive loss and changes in shareholders’ equity respectively. The Company treats
transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A
change in ownership interests results in an adjustment between the carrying amounts of the controlling and non-controlling
interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognized in contributed surplus within equity attributable to the owners of the
Company.
Subsequent to July 31, 2020, the Company’s ownership interest in HIO was further reduced to 29.89% as a result of a direct
private placement completed by HIO. See Note 15 – Subsequent events.
Cash
The Company considers cash on hand, deposits in banks and bank term deposits with maturities of 90 days or less as cash.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. Impairment charges are included in
accumulated depreciation.
Depreciation is provided using the following methods and estimated useful life:
Asset
Computer equipment and software
Furniture and fixtures
Research and manufacturing equipment
Leasehold improvements
Basis
Straight line
Straight line
Straight line
Straight line
Rate
3 years
5 years
4-10 years
Lease term
Leases
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost. Subsequent to initial application, the right-of-use asset is measured at cost less any accumulated
depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability. In comparison, the lease
liability is increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected
to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension
option is reasonably certain to be exercised or a termination option is reasonably certain to be exercised or a termination option
is reasonably certain not to be exercised.
The Company has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include
renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term,
which significantly affects the amount of lease liabilities and right-of-use assets recognized.
Research and development costs
Research costs are expensed as incurred. Development costs are expensed as incurred except for those which meet the criteria
for deferral, in which case, the costs are capitalized and amortized to operations over the estimated period of benefit. No costs
have been deferred to date.
Investment tax credits
The Company is entitled to Canadian federal and provincial investment tax credits, which are earned as a percentage of eligible
research and development expenditures incurred in each taxation year. Investment tax credits are accounted for as a reduction
of the related expenditure for items of a current nature and a reduction of the related asset cost for items of a capital nature,
provided that the Company has reasonable assurance that the tax credits will be realized.
Stock-based compensation
The Company accounts for stock-based compensation and other stock-based payments awarded to employees in accordance
with the fair value method. The fair value of stock options granted is determined at the appropriate measurement date using the
Black-Scholes option pricing model, and generally expensed over the options’ vesting period for employee awards. Awards with
graded vesting are considered multiple awards for fair value measurement and stock-based compensation calculation. In
determining the expense, the Company accounts for forfeitures using an estimate based on historical trends. When stock-based
compensation and other stock-based payments are awarded to persons other than non-employees, share capital is increased for
the fair value of goods and services received.
11
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Foreign currency translation
The Company’s currency of presentation is the Canadian dollar, which is also the Company’s functional currency. Foreign
currency-denominated items are translated into Canadian dollars. Monetary assets and liabilities in foreign currencies are
translated into Canadian dollars at the rates of exchange in effect at the balance sheet dates. Non-monetary items are translated
at historical exchange rates. Revenue and expenses are translated at the exchange rates prevailing at their respective transaction
dates. Exchange gains and losses arising on translation are included in income.
Income taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of certain existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted or substantively 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 income in the period that includes the date of substantive enactment. Given the Company’s history of net
losses and expected future losses, the Company is of the opinion that it is probable that these tax assets will not be realized in
the foreseeable future and therefore, the deferred tax asset has not been recognized.
Financial instruments
The Company’s financial assets and liabilities are initially recorded at fair value and subsequently measured based on their
assigned classifications as follows. The classification depends on the nature and purpose of the financial asset or liability and is
determined at the time of initial recognition.
Asset / Liability
Cash
Account receivable
Accounts payable
Accrued liabilities
Lease liabilities
Classification
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
De-recognition of financial assets and liabilities
De-recognition is applied for all or part of a financial asset when the contractual rights to the cash flows and benefits from the
financial asset expire, the Company loses controls of the assets, or the Company substantially transfers the significant risks and
rewards of ownership of the asset.
De-recognition is applied for all or part of a financial liability when the liability is extinguished due to cancellation or discharge or
expiry of the obligation.
Impairment
(i) Financial assets:
On an individual basis, material financial assets are assessed for indicators of impairment at the end of each reporting period.
Other individually non-material financial assets are tested as a group of financial assets based on similar risk characteristic.
Financial assets are considered to be impaired when based upon an expected loss model as prescribed by IFRS 9, taking into
consideration both historic and forward-looking information.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the financial asset’s effective interest rate. Impairment losses
are recognized in income and reflected in an allowance account against the respective financial asset.
(ii) Non-financial assets:
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If such an indication exists, the recoverable amount is estimated.
The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For
the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of cash inflows of other assets or cash-generating
units. An impairment loss is recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated
recoverable amount.
12
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Impairment losses recognized in prior periods are assessed each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation, if no impairment loss had been recognized.
Basic and diluted loss per common share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of
shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share, except that
the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options
and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants
were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price
during the reporting periods. The inclusion of the Company’s stock options and warrants in the computation of diluted loss per
share has an anti-dilutive effect on the loss per share and, therefore, they have been excluded from the calculation of diluted loss
per share.
Government Grants and Disclosure of Government Assistance
Government grant funds are recognised in income when there is reasonable assurance that the Company has complied with the
conditions attached to them and that the grant funds will be received. Grant funds receivable are recognized in income over the
periods in which the entity recognizes as expenses, the related costs for which the grant is intended to compensate.
Adoption of new accounting standards
The Company has adopted new accounting standard IFRS 16 - Leases, effective for the Company’s annual period beginning
August 1, 2019. IFRS 16 supersedes IAS 17, Leases and IFRIC 4 Determining whether an arrangement contains a lease IFRS
16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term
of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.
The Company has applied IFRS 16 with a date of initial application of August 1, 2019 using the modified retrospective approach,
under which the cumulative effect of initial application is recognized in retained earnings at August 1, 2019. Under this approach,
the Company has not restated comparative information presented for 2019. Comparative information for 2019 is presented as
previously reported under IAS 17 and related interpretations. The Company has changed its accounting policy for lease contracts
as detailed below:
Previously, the Company determined at contract inception whether an arrangement is or contains a lease under International
Financial Reporting Interpretations Committee 4, Determining Whether an Arrangement contains a Lease ("IFRIC 4"). Under
IFRS 16, the Company assesses whether a contract is or contains a lease based on the new definition of a lease provided in
IFRS 16. IFRS 16 provides that a contract is, or contains, a lease if the contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which
transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and IFRIC 4 were not reassessed to determine whether they met the IFRS 16 definition of a
lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after August
1, 2019.
The Company previously classified leases as operating leases. Payments made under operating leases were recognized in
comprehensive income on a straight-line basis over the term of the lease (i.e. they were off-balance sheet). Under IFRS 16, the
Company recognizes right-of-use assets and lease liabilities for most leases - i.e. leases are on-balance sheet.
On transition to IFRS 16, the Company elected to apply recognition exemptions for short-term leases (i.e. leases with terms less
than 12 months or entered into on a month-to-month basis) and leases of IT equipment that are considered to be low-dollar value
leases. For leases of other assets, which were classified as operating leases under IAS 17, the Company recognized right-of-
use assets and lease liabilities.
Transition of leases classified as operating leases under IAS 17
At transition from IAS 17 to IFRS 16, lease liabilities were measured at the present value of the remaining lease payments,
discounted at the Company’s incremental borrowing rate of 5% as at August 1, 2019. Right-of-use assets are measured at an
amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The discount rate is subject
to estimation and based on significant management judgment.
13
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases
under IAS 17:
• Applied the exemptions not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease
term and/or of low-dollar value.
• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
Impact on financial statements on transition
On transition to IFRS 16, the Company recognized $258,072 in right-of-use assets and lease liabilities. There was no impact on
the opening retained earnings as a result of the transition to IFRS 16.
The difference between the Company’s operating lease commitments note disclosure in the July 31, 2019 financial statements
and the amount of lease liabilities recognized under IFRS 16 is primarily due to some of the leases not qualifying for the short-
term lease exemption.
3. New accounting standards and pronouncements not yet adopted
There are no new accounting standards and pronouncements issued but not yet effective up to the date of issuance of the
Company's interim consolidated financial statements that are expected to have a material impact on the Company.
4. Property, plant and equipment
July 31, 2020
Transferred
July 31, 2019
Transferred
Research equipment
Manufacturing equipment
Leasehold improvements
Computer equipment
Computer software
Furniture and fixtures
Accumulated
Cost depreciation
$ 1,476
–
359
76
33
17
$ 1,961
$ 1,664
–
359
84
33
20
$ 2,160
to held for Net book
value
83
–
–
6
–
2
91
sale
$ (105) $
–
–
(2)
–
(1)
$ (108) $
Accumulated
Cost depreciation
$ 1,448
402
359
105
61
15
$ 2,390
$ 1,689
402
359
109
62
22
$ 2,643
$
to held for Net book
value
$ 241
–
–
4
1
7
$ 253
sale
–
–
–
–
–
–
–
$
5. Right-of-use assets
The movement and carrying amounts of the Company’s right-of-use assets and lease liabilities during the fiscal period ended July
31, 2020 are as follows:
July 31, 2020
Additions
Depreciation
Lease payments
Lease interest
Right of Use Assets
–
$
310
(155)
–
–
155
$
$
Lease Liability
–
310
–
(161)
10
159
$
Lease expense for leases categorized as short term in fiscal 2020 total $34,000 (2019 - $37,000).
6. Shareholders’ equity / (deficiency)
Preferred shares
Authorized 10,000,000 preferred shares.
As at July 31, 2020 and July 31, 2019 the Company had nil preferred shares issued and outstanding.
Common shares and share purchase warrants
Authorized unlimited common shares without par value.
As at July 31, 2020 the Company had 132,933,017 (July 31, 2019 – 111,225,501) common shares issued and outstanding.
On August 8, 2018, the Company completed a private placement, issuing a total of 682,000 units at $1.20 per unit for gross
proceeds of approximately $818,000. Each common share purchase warrant entitles the holder to purchase one common share
14
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
at a price of $1.50 until August 7, 2023. Of the gross proceeds amount, $212,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $606,000 was allocated to the common shares. Share issue costs totalling
$157,000 were proportionately allocated to the share purchase warrants ($41,000) and the common shares ($116,000),
respectively.
On September 10, 2018, the Company completed a private placement, issuing a total of 380,000 units at $1.20 per unit for gross
proceeds of approximately $456,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until September 9, 2023. Of the gross proceeds amount, $128,000 was allocated to the share purchase
warrants based on fair value and the residual amount of $328,000 was allocated to the common shares. Share issue costs
totalling $111,000 were proportionately allocated to the share purchase warrants ($31,000) and the common shares ($80,000),
respectively.
On October 30, 2018, the Company completed a private placement, issuing a total of 285,000 units at $1.20 per unit for gross
proceeds of approximately $342,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until October 29, 2023. Of the gross proceeds amount, $61,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $281,000 was allocated to the common shares. Share issue costs totalling $95,000
were proportionately allocated to the share purchase warrants ($17,000) and the common shares ($78,000), respectively.
On December 6, 2018, the Company completed a private placement, issuing a total of 726,000 units at $1.20 per unit for gross
proceeds of approximately $871,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until December 5, 2023. Of the gross proceeds amount, $184,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $687,000 was allocated to the common shares. Share issue costs totalling
$150,000 were proportionately allocated to the share purchase warrants ($32,000) and the common shares ($118,000),
respectively.
On December 20, 2018, the Company completed a private placement, issuing a total of 285,000 units at $1.20 per unit for gross
proceeds of approximately $342,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until December 19, 2023. Of the gross proceeds amount, $75,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $267,000 was allocated to the common shares. Share issue costs totalling $59,000
were proportionately allocated to the share purchase warrants ($13,000) and the common shares ($46,000), respectively.
On December 21, 2018, the Company completed a private placement, issuing a total of 584,000 units at $1.20 per unit for gross
proceeds of approximately $701,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until December 20, 2023. Of the gross proceeds amount, $153,300 was allocated to the share purchase
warrants based on fair value and the residual amount of $547,500 was allocated to the common shares. Share issue costs
totalling $121,000 were proportionately allocated to the share purchase warrants ($26,000) and the common shares ($95,000),
respectively.
On December 28, 2018, the Company completed a private placement, issuing a total of 290,000 units at $1.20 per unit for gross
proceeds of approximately $348,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $1.50 until December 27, 2023. Of the gross proceeds amount, $79,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $269,000 was allocated to the common shares. Share issue costs totalling $60,000
were proportionately allocated to the share purchase warrants ($14,000) and the common shares ($46,000), respectively.
On March 15, 2019, the Company completed a private placement, issuing a total of 1,195,000 units at $0.51 per unit for gross
proceeds of approximately $610,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $0.72 until March 14, 2024. Of the gross proceeds amount, $192,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $418,000 was allocated to the common shares. Share issue costs totalling $86,000
were proportionately allocated to the share purchase warrants ($27,000) and the common shares ($59,000), respectively.
On April 18, 2019, the Company completed a private placement, issuing a total of 1,992,922 units at $0.51 per unit for gross
proceeds of approximately $1,016,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $0.72 until April 17, 2024. Of the gross proceeds amount, $330,000 was allocated to the share purchase warrants
based on fair value and the residual amount of $686,000 was allocated to the common shares. Share issue costs totalling
$140,000 were proportionately allocated to the share purchase warrants ($45,000) and the common shares ($95,000),
respectively.
On April 29, 2019, the Company completed a private placement, issuing a total of 1,000,000 units at $0.51 per unit for gross
proceeds of approximately $510,000. Each common share purchase warrant entitles the holder to purchase one common share
at a price of $0.72 until April 28, 2024. Of the gross proceeds amount, $164,000 was allocated to the share purchase warrants
15
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
based on fair value and the residual amount of $346,000 was allocated to the common shares. Share issue costs totalling $73,000
were proportionately allocated to the share purchase warrants ($23,000) and the common shares ($50,000), respectively.
On May 29, 2019, the Company completed a private placement, issuing a total of 996,000 units at $0.51 per unit for gross proceeds
of approximately $508,000. Each common share purchase warrant entitles the holder to purchase one common share at a price
of $0.72 until May 28, 2024. Of the gross proceeds amount, $146,000 was allocated to the share purchase warrants based on
fair value and the residual amount of $362,000 was allocated to the common shares. Share issue costs totalling $60,000 were
proportionately allocated to the share purchase warrants ($17,000) and the common shares ($43,000), respectively.
On August 21, 2019, the Company completed a private placement financing of 13,725,500 units of the Company at a price of
$0.51 per unit and the disposition of a 25% stake of its Polish subsidiary, for aggregate gross proceeds of approximately
$7,000,000. Each unit consisted of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share of the Company at a price of $0.72 until August 20, 2024. Of the
aggregate gross proceeds, approximately $755,000 was allocated to the disposition of the Company’s 25% stake in its Polish
subsidiary with costs totalling approximately $99,000. Of the residual gross proceeds amount of $6,245,000, approximately
$2,275,000 was allocated to the share purchase warrants based on fair value and approximately $3,970,000 was allocated to the
common shares. Share issue costs totalling $815,000 were proportionately allocated to the share purchase warrants ($297,000)
and the common shares ($518,000), respectively.
On January 13, 2020, the Company completed a private placement financing of 2,940,000 units of the Company at a price of
$1.02 per unit and the disposition of an 8.5% stake of its Polish subsidiary, for aggregate gross proceeds of approximately
$2,999,000. Each unit consisted of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share of the Company at a price of $1.42 until January 12, 2025. Of the
aggregate gross proceeds, approximately $433,000 was allocated to the disposition of the Company’s 8.5% stake in its Polish
subsidiary with costs totalling approximately $57,000. Of the residual gross proceeds amount of $2,566,000, approximately
$956,000 was allocated to the share purchase warrants based on fair value and approximately $1,610,000 was allocated to the
common shares. Share issue costs totalling approximately $339,000 were proportionately allocated to the share purchase
warrants ($126,000) and the common shares ($213,000), respectively.
On March 12, 2020, the Company completed a private placement financing of 5,042,016 units of the Company at a price of $1.19
per unit including the disposition of a 15.5% stake of its Polish subsidiary, for aggregate gross proceeds of approximately
$6,000,000. Each unit consisted of one common share and one common share purchase warrant. Each common share purchase
warrant entitles the holder to purchase one common share of the Company at a price of $1.67 until March 11, 2025. Of the
aggregate gross proceeds, approximately $791,000 was allocated to the disposition of the Company’s 15.5% stake in its Polish
subsidiary with costs totalling approximately $103,000. Of the residual gross proceeds amount of $5,209,000, approximately
$1,900,000 was allocated to the share purchase warrants based on fair value and approximately $3,310,000 was allocated to the
common shares. Share issue costs totalling approximately $682,000 were proportionately allocated to the share purchase
warrants ($249,000) and the common shares ($433,000), respectively.
The following table provides information on share purchase warrants outstanding as at:
July 31, 2020
July 31, 2019
Weighted average
remaining contractual
life (in years)
Number of share
purchase warrants
outstanding
Weighted average
remaining contractual
life (in years)
Number of share
purchase warrants
outstanding
Exercise Price
$ 0.72
$ 1.42
$ 1.50
$ 1.54
$ 1.61
$ 1.67
$ 1.82
$ 1.92
$ 1.98
$ 2.24
Outstanding, end of period
3.97
4.45
2.32
1.74
0.25
4.61
0.99
1.05
0.70
0.94
2.64
18,909,422
2,940,000
15,982,300
8,680,000
4,546,000
5,042,016
1,250,000
644,675
3,105,000
3,981,000
65,080,413
4.72
–
3.32
2.75
1.25
–
1.99
2.05
1.70
1.94
2.85
5,183,922
–
15,982,300
8,680,000
4,546,000
–
1,250,000
644,675
3,105,000
3,981,000
43,372,897
Stock options
The Company’s equity compensation plan reserves up to 10% of the Company’s outstanding common shares from time to time
for granting to directors, officers and employees of the Company or any person or company engaged to provide ongoing
management or consulting services. Based on the Company’s current issued and outstanding common shares as at July 31,
16
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
2020, options to purchase up to 13,293,301 common shares (July 31, 2019 – 11,122,550) may be granted under the plan. As at
July 31, 2020, options to purchase a total of 5,225,000 common shares (July 31, 2019 – 4,875,000) were issued and outstanding
under the equity compensation plan.
The following table provides information on options outstanding and exercisable as at July 31:
2020
Exercise
Price
$0.51
$1.30
$1.50
$1.65
$2.00
remaining contractual
Weighted average Number of
options
life (in years) outstanding
4,625,000
550,000
–
–
50,000
3.72
4.36
–
–
0.25
Number of
vested and
exercisable
options
2,550,002
183,333
–
–
50,000
Weighted average
remaining contractual
life (in years)
4.72
–
0.46
0.26
1.26
2019
Number of
options
outstanding
4,625,000
–
150,000
50,000
50,000
Number of
vested and
exercisable
options
2,149,998
–
150,000
50,000
50,000
Outstanding, end of period
3.75
5,225,000
2,783,335
4.51
4,875,000
2,399,998
The following table summarized activity under the Company’s stock option plan for the year ended:
July 31, 2020
July 31, 2019
Outstanding, beginning of year
Granted
Exercised
Expired
Outstanding, end of year
Number
4,875,000
550,000
–
(200,000)
5,225,000
Vested and exercisable, end of year 2,783,335
Weighted average
exercise price
0.57
1.30
–
1.54
$
$
$
0.61
0.59
Number
930,000
4,625,000
–
(680,000)
4,875,000
2,399,998
Weighted average
exercise price
1.27
0.51
–
1.14
$
$
$
0.57
0.57
Weighted average market share prices for stock options exercised during the fiscal year ended July 31, 2020 and 2019 were both
$nil, respectively. For the fiscal year ended July 31, 2020, 583,337 stock options vested (July 31, 2019 – 2,166,665) with a fair
value of $190,000 (July 31, 2019 – $312,000).
The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the
following assumptions:
Grant
Date
November 2, 2015
May 27, 2019
December 12, 2019
Number
of options
granted
50,000
4,625,000
550,000
Volatility
factor
80.47%
66.76%
73.81%
Risk free
interest
rate
0.73%
1.49%
1.67%
Dividend
rate
Expected
life
nil
nil
nil
5 years
5 years
5 years
Vesting
period
3 years
2 years
2 years
Fair value
of options
granted
$
$
$
61
666
397
7. Commitments, contingent liabilities and contingent assets
The Company’s commitments are summarized as follows:
Clinical research organizations
Collaborative research organizations
Contract manufacturing organizations
Royalty and in-licensing
Financial & investor relations
Facility leases
2021
$ 2,203
1,496
196
20
146
41
$ 4,102
2022
$ 1,406
–
–
20
–
–
$ 1,426
2023
$ 106
–
–
20
–
–
$ 126
2024
–
–
–
20
–
–
20
$
$
$
2025
–
–
–
10
–
–
$ 10
2026+
$
$
–
–
–
60
–
–
60
Total
$ 3,715
1,496
196
150
146
41
$ 5,744
Clinical Research Organization (“CRO”) Commitments
The Company has CRO supplier agreements in place for clinical research services related to the management of the Company’s
clinical stage programs. As at July 31, 2020, the Company has accrued $861,000 (2019 – $581,000).
17
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Collaborative Research Organization Service Commitments
The Company has collaborative research agreements relating to its L-DOS47 and CAR-T programs. As at July 31, 2020, the
Company has accrued $nil (2019 – $118,000).
Contract Manufacturing Organization (“CMO”) commitments
The Company has CMO supplier agreements related to the Company’s L-DOS47 program, all of which are inter-dependant with
manufacturing of L-DOS47. As at July 31, 2020, the Company had accrued $303,000 (2019 – $5,000),
Royalty and in-licensing commitments
Pursuant to an agreement dated April 28, 2005 with the National Research Council of Canada (the “NRC”), the Company is
required to pay a royalty to the NRC of 3% of net sales, with a minimum royalty of $10,000 per annum generated from the use of
a certain antibody to target cancerous tissues of the lung. In addition to the royalty payments, the Company is also required to
make certain milestone payments: $25,000 upon successful completion of Phase I clinical trials; $50,000 upon successful
completion of Phase IIb clinical trials; $125,000 upon successful completion of Phase III clinical trials; and $200,000 upon receipt
of market approval by regulatory authority. L-DOS47 is subject to this agreement.
Pursuant to an agreement dated September 22, 2016 with the National Research Council of Canada, the Company is required to
pay a royalty to the NRC of 3% of net sales, with a minimum royalty of $10,000 per annum generated from the use of a certain
antibody to target cancerous tissues of the lung. In addition to the royalty payments, the Company is also required to make certain
milestone payments for the first licensed product: $25,000 upon successful completion of Phase I clinical trials; $50,000 upon
successful completion of Phase IIb clinical trials; $150,000 upon successful completion of Phase III clinical trials; $200,000 upon
receipt of first regulatory approval by a regulatory authority; and $200,000 upon receipt of a second regulatory approval by a
regulatory authority. For the development of each subsequent licensed product: $200,000 upon receipt of first regulatory approval
by a regulatory authority; and $200,000 upon receipt of a second regulatory approval by a regulatory authority. As it relates to
sub-licensing arrangements, the Company is required to pay the NRC 33% of any sub-licensing revenues received. The anti-
CEACAM6 single domain antibody 2A3 is subject to this agreement. As at July 31, 2020 the Company has accrued $nil (2019 –
$nil).
Financial and investor relations agreements
The Company has agreements with both ACM Alpha Consulting Management EST (“ACMest”) and ACM Alpha Consulting
Management AG (“ACMag”). The agreements are both effective July 2, 2018 and can be terminated upon ninety days notice.
Mr. Kandziora is President of ACMest and acted as Observer on the Board of Directors of the Company up until August 22, 2019
in addition to also being on the Supervisory Board of the Company’s wholly owned Polish subsidiary, Helix Immuno-Oncology
S.A. Mrs. Kandziora is President of ACMest and was Corporate Secretary up until August 22, 2019.
The agreement with ACMest includes the following provision:
a) a monthly fee for investor relations services of CHF33,000 and reimbursement of certain expenses.
The agreement with ACMag includes the following provision:
a) a 12.5% fee on the gross proceeds on any capital raised up to six months after the termination of this agreement from
an ACMest introduced investor with residency outside Canada and the U.S.
At July 31, 2020, the Company accrued $nil and $nil for services provided by ACMest and ACMag, respectively (2019 – $353,000
and $713,000, respectively).
On October 21, 2020 the agreements with both ACM Alpha Consulting Management EST and ACM Alpha Consulting Management
AG were terminated by mutual agreement of the parties. Also see Note 10 – Related Party Transactions and Note 15 –
Subsequent events.
Operating lease commitments
The Company is committed to paying $41,000 under three month to month facility lease agreements with notice periods of no
longer than six months.
8. Capital risk management
The Company’s main objectives when managing capital are to ensure sufficient liquidity to finance research and development
activities, clinical trials, ongoing administrative costs, working capital and capital expenditures. The Company includes cash in
18
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
the definition of capital. The Company endeavours not to unnecessarily dilute shareholders when managing the liquidity of its
capital structure.
Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and
stock options, and, to a lesser extent, from interest income from funds available for investment, government grants and investment
tax credits. Since the Company does not have net earnings from its operations, the Company’s long-term liquidity depends on its
ability to access capital markets, which depends substantially on the success of the Company’s ongoing research and
development programs, as well as capital market conditions and availability.
The Company does not currently have enough cash reserves to fully fund its clinical trials nor does the Company have sufficient
cash reserves to meet anticipated cash needs for working capital and capital expenditures through at least the next twelve months.
The Company does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or
covenants.
See also Note 1 - Basis of presentation and going concern.
9. Financial instruments and risk management
Fair value hierarchy
Financial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
a. Level 1 reflects valuation based on quoted prices observed in active markets for identical assets or liabilities;
b. Level 2 reflects valuation techniques based on inputs that are quoted prices of similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a
valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and
c. Level 3 reflects valuation techniques with significant unobservable market inputs.
A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring
fair value.
Fair value
The fair value of financial instruments as at July 31, 2020 and July 31, 2019 approximates their carrying value because of the
near-term maturity of these instruments.
Financial risk management
The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including currency and interest rate
risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on financial performance.
Risk management (the identification and evaluation of financial risk) is carried out by the finance department, in close cooperation
with management. The finance department is charged with the responsibility of establishing controls and procedures to ensure
that financial risks are mitigated in accordance with the approved policies. The Company’s Board of Directors has the overall
responsibility for the oversight of these risks and reviews the Company’s policies on an ongoing basis to ensure that these risks
are appropriately managed.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s
income or the value of its financial instruments.
Currency risk
The Company has international transactions and is exposed to foreign exchange risks from various currencies, primarily the Euro
and U.S. dollar. In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and
liabilities denominated in foreign currencies.
19
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Balances in foreign currencies are as follows, as at July 31:
2020
2019
Cash
Accounts receivable
Accounts payable
Accruals
Net foreign currencies
USD
–
–
(622)
(44)
(666)
EUR
–
–
(257)
–
(257)
USD
–
–
(563)
–
(563)
EUR
–
–
(401)
(25)
(426)
Closing exchange rate
Impact of 1% change in exchange rate
1.3404
+/- 9
1.5831
+/- 4
1.3148
+/-7
1.4627
+/- 6
Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Company’s results from
operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which
are affected by market conditions. The Company is exposed to interest rate risk arising from fluctuations in interest rates received
on its cash and cash equivalents. The Company does not have any credit facilities and is therefore not subject to any debt related
interest rate risk.
The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the
liquidity necessary to conduct its operations on a day-to-day basis. Any investment of excess funds is limited to risk-free financial
instruments. Fluctuations in the market rates of interest do not have a significant impact on the Company’s results of operations
due to the relatively short-term maturity of any investments held by the Company at any given point in time and the low global
interest rate environment. The Company does not use derivative instruments to reduce its exposure to interest rate risk.
Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation.
The table below breaks down the various categories that make up the Company’s accounts receivable balances as at July 31:
Government related – HST/VAT
Research and development investment tax credits
Other
$
2020
46
121
13
$ 180
2019
82
121
87
290
$
$
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due. Since inception, the Company
has mainly relied on financing its operations from public and private sales of equity. The Company does not have any credit
facilities and is therefore not subject to any externally imposed capital requirements or covenants.
The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company’s cash reserves of $4,235,000 as at July 31, 2020 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see the current research and development
initiates through to completion. To the extent that the Company does not believe it has sufficient liquidity to meet its current
obligations, management considers securing additional funds primarily through equity arrangements to be of utmost importance.
The Company’s long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success
of the Company’s ongoing research and development programs, as well as economic conditions relating to the state of the capital
markets generally. Accessing the capital markets is particularly challenging for companies that operate in the biotechnology
industry.
20
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at:
Accounts payable
Accrued liabilities
July 31, 2020
Carrying
amount
$ 1,416
301
Less than Greater than
one-year
one year
$ 1,416
–
$
–
301
July 31, 2019
Carrying
amount
$ 3,040
1,057
Less than Greater than
one-year
one year
–
$ 3,040
$
–
1,057
This table only covers liabilities and obligations relative to financial instruments and does not anticipate any income associated
with assets.
See also Note 1 - Basis of presentation and going concern.
10. Related party transactions
The following table summarizes key management personnel compensation for the fiscal years ended:
Compensation
Stock-based compensation
2020
586
147
733
$
$
$
2019
767
291
$ 1,058
An amount of $225,000 was advanced to the Company by an officer. The advance is interest bearing at 4% per annum and is
repayable, on demand, no later than August 30, 2019. The principle amount along with interest, was repaid, as per terms. The
advance is included in accruals as at July 31, 2019. The amount was fully paid back along with interest by August 30, 2019.
The following table summarizes non-management directors’ compensation for the fiscal years ended:
Directors’ fees
Stock-based compensation
2020
174
280
454
$
$
The following table summarizes the total compensation for both ACMest and ACMag for the fiscal years ended:
Finder’s fee commissions (ACMag)
Financial and investor relations consulting fee (ACMest)
2020
$ 2,000
548
$ 2,548
2019
162
24
186
$
$
$
2019
940
571
$ 1,511
The Company has agreements with both ACM Alpha Consulting Management EST (“ACMest”) and ACM Alpha Consulting
Management AG (“ACMag”). The agreements are both effective July 2, 2018 and can be terminated immediately in certain
circumstances or upon up to ninety days notice. Mr. Kandziora is President of ACMest and acted as Observer on the Board of
Directors of the Company up until August 22, 2019 in addition to also being on the Supervisory Board of the Company’s wholly
owned Polish subsidiary, Helix Immuno-Oncology S.A. Mrs. Kandziora is President of ACMest and was Corporate Secretary up
until August 22, 2019. On October 21, 2020 the agreements with both ACMag and ACMest were terminated by mutual agreement
of the parties. Also see Note 6 – Commitments, contingent liabilities, and contingent assets and Note 15 – Subsequent events.
Related party transactions are at arm’s length and recorded at the amount agreed to by the related parties.
11. Research and development projects
Included in research and development expenditures are costs directly attributable to the various research and development
functions and initiatives the Company has underway and include: salaries; bonuses; benefits; stock-based compensation;
depreciation of property, plant and equipment; patent costs; consulting services; third party contract manufacturing, third party
clinical research organization services; and all overhead costs associated with the Company’s research facilities.
21
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
The following table outlines research and development costs expensed and investment tax credits for the Company’s significant
research and development projects for the fiscal years ended July 31:
L-DOS47
CAR-T
Corporate research and development expenses
Trademark and patent related expenses
Stock-based compensation expense
Amortization of property plant and equipment
Amortization of right of use assets
Research and development investment tax credits
12. Operating, General and Administration
$
2020
4,715
64
393
516
117
54
129
(120)
$ 5,868
2019
$ 3,530
333
531
435
197
48
–
(126)
$ 4,948
The following table outlines operating, general and administration costs expensed a for the fiscal years ended July 31:
Wages and benefits
Director fees
Third-party advisors
Other general and administrative
Stock-based compensation expense
Amortization of property plant and equipment
Amortization of right of use assets
13. Income taxes
$
2020
434
174
1,419
339
353
3
26
$ 2,748
2019
493
162
762
239
164
7
–
1,827
$
$
The Company recognizes deferred tax assets and liabilities for expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities and certain carry-forward balances. The Company’s
effective income tax rate in fiscal 2020 is 25.8% (2019 – 25.8%).
Current income tax loss and non-capital tax loss carry forwards
As at July 31, 2020, the Company has Canadian tax losses that can be carried forward of approximately $96,760,000 (2019 –
$89,182,000) and are available until 2040 as follows:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
$
862
2,113
2,904
2,438
9,188
6,552
6,792
13,242
2,437
6,727
7,256
7,883
7,884
7,152
5,739
7,591
$ 96,760
22
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
The tax effects of temporary differences for the Company that gives rise to the unrecorded deferred tax asset presented in the
following table:
Deferred tax assets:
Scientific Research & Experimental Development expenditure pool
Non-capital losses and other credits carried forward
Capital losses carried forward
Excess of tax basis over book basis of capital assets
Deductible share issue costs
2020
2019
$ 13,013
24,967
315
1,864
762
$ 40,921
$ 12,716
23,012
156
1,757
629
$ 38,270
Scientific Research & Experimental Development expenditures (“SR&ED”)
Under the Income Tax Act (Canada), certain expenditures are classified as SR&ED expenditures and are grouped into a pool for
tax purposes. This expenditure pool can be carried forward indefinitely and deducted in full in any subsequent year. The SR&ED
expenditure pool at July 31, 2020 is approximately $50,432,000 (2019 – $49,280,000).
Investment tax credits
The Company has also earned investment tax credits in Canada, on eligible SR&ED expenditures at July 31, 2020 of
approximately $11,808,000 (2019 – $11,681,000), which can offset Canadian income taxes otherwise payable in future years up
to 2040. Investment tax credits are accounted for as a reduction of the related expenditure for items of a current nature and a
reduction of the related asset cost for items of a capital nature, provided that the Company has reasonable assurance that the tax
credits will be realized. During the year, the Company received cash refundable investment tax credits related to prior years in
the amount of $120,000 (2019 – $238,000). At July 31, 2020, cash refundable investment tax credits total $120,000 (2019 –
$121,000). The research and development investment tax credits recorded are based on management’s estimates of amounts
expected to be recovered and are subject to audit by the taxation authorities and, accordingly, these amounts may vary. Federal
investment tax credits are non-refundable to the Company. Refundable investment tax credits reflect eligible SR&ED expenditures
incurred in Ontario, Alberta and Quebec.
14. Assets held for sale, discontinued operations and Non-Controlling Interest (“NCI”)
On August 21, 2019, January 13, 2020 and March 12, 2020, in connection with the Company’s three private placements the
Company also sold 49% of its ownership interest in its Polish subsidiary, Helix Immuno-Oncology S.A. See also Note 6 –
Shareholders’ equity / (deficiency). On March 16, 2020, the Company publicly announced its intention to divest its remaining 51%
ownership interest in the Polish subsidiary.
The Company has also approved an increase in share capital of HIO and the issuance of up to 2.2 million Series B ordinary shares
in the capital of HIO to enable HIO to issue up to 2.2 million Series B ordinary shares by way of a direct private placement financing
for aggregate gross proceeds of approximately 2.97 million Polish zloty. HIO completed the private placement on July 8, 2020 and
as a result the Company's shareholding in HIO at July 31, 2020 represents 42.51% of the outstanding shares of HIO.
The Company continues to be in discussion with CAIAC Fund Management AG, to divest its remaining holdings in HIO for gross
proceeds of 6.7 million Polish zloty (approximately $2.3 million). The transaction was originally scheduled to close on Aug. 31,
2020 but was deferred to October 31, 2020 and is subject to a number of conditions, including the raising of a minimum 7.3 million
Polish zloty by the fund as well as regulatory approval of the transaction, if required. There can be no assurance that the closing
of the divestment will occur.
The Company entered into agreements with HIO, pursuant to which it has cancelled an aggregate amount of approximately $2.7
million of intercompany debt owed to the Company by HIO. Since HIO is a subsidiary of the Company, the consolidated statements
of financial position of the Company have not presented intercompany transactions. As part of the debt cancellation agreements
and the termination by HIO of the Grant Funding Agreement (the “Agreement”) with the Polish National Centre for Research and
Development (“PNCRD”)., the Company and HIO agreed to terminate both the Biphasix asset transfer agreement and the V-
DOS47 license agreement. In certain cases of termination, HIO may be obligated to return any financial support in full within
fourteen days of the day notice is served by the PNCRD along with any interest. As at July 31, 2020, HIO had received subsidies
from the PNCRD of approximately $1,457,000.
As a result, all transferred assets related to Biphasix and V-DOS47 have been automatically reassigned and transferred from HIO
back to the Company without any formality. The Company has also ceased financing HIO with immediate effect as of June 25,
2020.
Summarized financial information in relation to HIO, the Company’s subsidiary with a non-controlling interest, is presented below.
HIO has been classified as held for sale and as a discontinued operation at July 31, 2020.
23
HELIX BIOPHARMA CORP.
Notes to Consolidated Financial Statements
Years ended July 31, 2020 and 2019
(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
Summarized financial information in relation to HIO is presented below together with the amounts attributable to NCI.
Statement of stand alone net loss and comprehensive loss for the fiscal years ended July 31:
Research and development expenses (net of PNCRD grant)
Operating, general and administration
Finance items
Net loss and comprehensive loss
Net loss and comprehensive loss allocated to NCI
Statement of financial position, before intra-company elimination entries, as at July 31:
Assets:
Current assets
Property, plant and equipment
Liabilities:
Current liabilities
Shareholders’ equity / (deficiency)
Accumulated non-controlling interest
2020
2019
$
43
459
111
613
189
$
1
648
70
719
–
2020
2019
$ 1,002
69
$
171
121
49
1,022
587
240
(1,266)
–
Assets and liabilities held for sale at July 31, 2020 are $156,000 (2019 - $nil) and $49,000 (2019 - $nil), respectively.
15. Subsequent events
On September 3, 2020, HIO closed a direct private placement resulting in a dilution of the Company’s holding in HIO from 42.51%
at July 31, 2020 down to 29.89%.
On October 21, 2020 the agreements with both ACM Alpha Consulting Management EST and ACM Alpha Consulting Management
AG were terminated by mutual agreement of the parties.
16. Reclassification of prior year presentation
Certain prior period amounts have been reclassified for consistency with the current fiscal period presentation. The adjustment
reflects the reclassification of discontinued operations associated with the Company’s Polish subsidiary, HIO. On the Consolidated
Statement of Financial Position as at July 31, 2020, assets available for sale in addition to liabilities related to assets held for sale
have been reclassified and separately disclosed from other assets and liabilities. On the Consolidated Statement of Net Loss and
Comprehensive Loss, expenses and finance items associated with HIO have been reclassified and the total separately disclosed
as net loss from discontinued operations for the current period and comparative prior periods. On the Consolidated Statement of
Cash Flows, net cash flows attributable to the operating, investing, and financing activities of discontinued operations have been
separately disclosed for the current period and comparative prior periods.
___________
24
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in
conjunction with the consolidated financial statements of Helix BioPharma Corp. (the “Company” or “Helix”) for the years ended
July 31, 2020 and 2019 and the accompanying notes thereto. This MD&A is based on financial statements which have been
prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts are depicted in Canadian currency
unless otherwise noted.
Additional information relating to the Company can be found in the Company’s Annual Information Form, which is available on
SEDAR at www.sedar.com.
FORWARD-LOOKING INFORMATION
This MD&A contains “forward-looking statements” and “forward-looking information” within the meaning of applicable Canadian
securities laws (collectively, “forward-looking information”). Forward-looking information means disclosure regarding possible
events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action
and includes financial projections and estimates; statements regarding plans, goals, objectives, intentions and expectations with
respect to the Company’s future business, operations, research and development, including the focus of the Company’s primary
drug product candidate L-DOS47 and other information relating to future periods. Forward-looking information includes, without
limitation, statements concerning: (i) the Company’s ability to continue to operate on a going concern basis being dependent
mainly on obtaining additional financing; (ii) the Company’s growth and future prospects being dependent mainly on the success
of L-DOS47; (iii) the Company’s priority continuing to be L-DOS47; (iv) the Company’s development programs, including but not
limited to, extension of the current drug candidate(s) to other indications and the identification and development of further tumour-
targeting antibodies for DOS47; (v) the nature, design and anticipated timeline for completion of enrollment and other matters
relating to the Company’s ongoing clinical study programs such as the recently approved Investigational New Drug (“IND”) Phase
Ib/II combination study combination with doxorubicin for previously treated advanced pancreatic cancer patients by U.S Food and
Drug Administration (“FDA”); (vi) the Company seeking strategic partner support and therapeutic market opportunities; (vii) future
expenditures, insufficiency of the Company’s current cash resources and the need for financing and the Company’s possible
response for such matters; (viii) future financing requirements, the seeking of additional funding and anticipated future operating
losses; (ix) changes in the application of accounting standards and interpretations; (x) industry performance, competition (including
potential developments relating to immunotherapies and the Company’s possible response to such developments), prospects,
and general prevailing business and economic conditions; (xi) the Company’s technology and research and development
objectives, including development milestones, estimated costs, schedules for completion and probability of success; (xii) the
Company’s expectation that it can in a timely manner, or at all, produce the appropriate preclinical, and if necessary, clinical data
required; (xiii) the Company’s plans to develop L-DOS47 and the estimated incremental costs (including the status, cost and timing
of achieving the development milestones disclosed herein); (xiv) the Company’s intentions with respect to initiating marketing
activities following receipt of the applicable regulatory approvals; (xv) the Company’s seeking of licensing opportunities to expand
its intellectual property portfolio; (xvi) the Company’s expectation that it will be able to finance its continuing operations by
accessing public markets for its securities; (xvii) the Company’s intended use of proceeds of any offering of its securities; and
(xviii) the Company’s intention with respect to not paying any cash dividends on its common shares (“Common Shares”) in the
foreseeable future. Forward-looking information can further be identified by the use of forward-looking terminology such as
“expects”, “plans”, “designed to”, “potential”, “believe”, “intended”, “continues”, “opportunities”, “anticipated”, “2020”, “2021”,
“2022”, “2023”, “next”, “ongoing”, “seek”, “objective”, “estimate”, “future”, or the negative thereof or any other variations thereon or
comparable terminology referring to future events or results, or that events or conditions “will”, “may”, “could”, “would”, or “should”
occur or be achieved, or comparable terminology referring to future events or results.
Forward-looking information includes statements about the future and are inherently uncertain and are necessarily based upon a
number of estimates and assumptions that are also uncertain. Although the Company believes that the expectations reflected in
such forward-looking information are reasonable, such statements involve risks and uncertainties, and undue reliance should not
be placed on such statements. Forward-looking information, including financial outlooks, are intended to provide information about
management’s current plans and expectations regarding future operations, including without limitation, future financing
requirements, and may not be appropriate for other purposes. The Company’s actual results could differ materially from those
anticipated in the forward-looking information contained in this MD&A as a result of numerous known and unknown risks and
uncertainties, including, but not limited to:
the Company’s lack of operating income and need for additional capital which may not be available in a timely manner
or at all;
the Company’s history of losses and expectations regarding incurring additional losses for the foreseeable future;
rapid technological change and competition from pharmaceutical companies, biotechnology companies and universities,
which may make the Company’s technology or products obsolete or uncompetitive;
25
the Company’s dependence on a single drug product candidate, L-DOS47, uncertainty as to the size and existence of a
market opportunity for, and market acceptance of the Company’s drug product candidate including as a result of possible
changes in the market for the Company’s drug candidates resulting from development in immunotherapies or other future
cancer treatments;
the possibility that the market may never accept L-DOS47;
uncertainty as to product development milestones and, in particular, whether the Company’s drug product candidate(s),
especially L-DOS47, will be successfully developed and marketed;
intellectual property risks, including the possibility that patent applications may not result in issued patents, that issued
patents may be circumvented or challenged and ultimately struck down, that any expiry of an issued patent, may
negatively impact the further development or commercialization of the underlying technology, and that the Company may
not be able to protect its confidential proprietary information;
risks relating to patent litigation;
risks relating to security breaches and other disruptions which may compromise the Company’s information and expose
the Company to liability and cause the Company’s business and reputation to suffer;
risks related to the potential infringement by the Company of the intellectual property rights of third parties, and the
possibility that such parties may commence legal proceedings to protect or enforce such rights, the outcome of which
would be uncertain and could harm the Company’s business;
risks associated with claims, or potential claims, of infringement of third-party intellectual property and other proprietary
rights;
risks relating to lawsuits or other proceedings commenced by the Company to protect or enforce the Company’s patents
or other intellectual property, and their potential effect on the Company;
risks relating to potential claims of third parties that the Company’s employees, collaborators, consultants or independent
contractors have wrongfully used or disclosed the confidential information of third parties, or that the Company’s
employees have wrongfully used or disclosed alleged trade secrets of their former employers;
research and development risks, including without limitation, the fact that the Company’s drug product candidate(s) are
complex compounds and the Company faces difficult challenges in connection with the manufacture of clinical batches,
and the risk of obtaining negative findings or factors that may become apparent during the course of research or
development, any of which may result in the delay or discontinuation of the research or development projects;
regulatory risks, including the lengthy, unpredictable and costly FDA regulatory approval process and the potential impact
on the Company if such approvals are not ultimately obtained;
the risk of unknown side effects arising from the development, manufacture or use of the Company’s products;
risk relating to the difficulty in enrolling patients in clinical trials which may result in delays or cancellation of clinical trials;
the Company’s dependence on third parties, including without limitation, contract research organizations, contract
manufacturing organizations, clinical trial consultants, collaborative research consultants, regulatory affairs advisors, and
others, whose performance and interdependence can critically affect the Company’s performance and the achievement
of its milestones;
the Company’s significant dependence on licensed intellectual property and the risk of losing or breaching such licenses;
the Company’s dependence on assurances from third parties regarding licensing of proprietary technology owned by
others, including the Company’s dependence on its license of the L-DOS47 antibody
risks relating to the marketability of the Company’s products arising from regulatory delays or inability to obtain regulatory
approval, and ongoing regulatory review and requirements;
uncertainty as to the availability of raw materials that the Company utilizes to manufacture its products, and in particular,
Good Manufacturing Practice (“GMP”) grade materials, on acceptable terms or at all, and that the Company may not be
able to timely obtain alternative suppliers upon commercially viable terms or at all, which could have a material adverse
effect on the further development and commercialization of any or all of the Company’s drug product candidate(s);
manufacturing risks, the need to manufacture to regulatory standards, uncertainty whether the manufacturing process
for the Company’s drug candidates can be further scaled-up successfully or at all and the risk that clinical batches of the
Company’s drug candidate may not be able to be produced in a timely manner or at all, which would have a negative
effect on the timing and/or occurrence of planned clinical trials and the potential commercialization of the drug candidates;
risks relating to the Company’s potential failure to find third party collaborators to assist or share in the costs of product
development and the potential impact on the Company’s business, financial condition and results of operations;
the need for future preclinical and clinical trials, and the reliance by the Company on third parties to conduct such trials,
the occurrence and success of which cannot be assured, and the fact that results seen in earlier clinical trials may not be
repeated in later trials;
product liability and insurance risks;
uncertainty as to the Company’s ability to maintain product liability insurance required by third parties and the risk of the
the risk of lawsuits and other legal proceedings against the Company;
corresponding agreement being terminated;
26
the need to attract and retain key personnel and reliance on key personnel;
the risk of misconduct on the part of employees and consultants, including non-compliance with regulatory standards and
requirements;
the risk that indemnification obligations to directors and officers may adversely affect the Company’s finances;
the impact on the Company’s finances resulting from shifts in foreign exchange rates, credit risk and interest rate risk;
risks related to adverse decisions by tax authorities and changes in law;
risks relating to the potential financial strain on the Company’s resources due to the requirements of being a public
company;
the impact of the ongoing volatility in the economic environment;
risks relating to compliance with environmental laws;
risk relating to a failure to maintain an effective system of internal controls;
risks related to epidemics, pandemics or other health crises, including the COVID-19 pandemic, and their potential effect
on the Company’s business, operations and financial condition;
volatility in the trading price and volume of the Common Shares and potential challenges in maintaining listing
requirements;
the possibility of dilution to current shareholders from future equity or convertible debt financings or through the exercise
of stock options, warrants or other securities convertible or exchangeable into Common Shares;
liquidity of the Common Shares;
the risk that inaccurate or unfavorable research about the Company’s business, or the lack of research about its business,
may affect the share price and trading volume of the Common Shares;
and other risk factors that are discussed above and elsewhere in this MD&A or identified in the Company’s other public filings
under the Company’s profile on SEDAR at www.sedar.com (together the “Helix Risk Factors”), any of which could cause actual
results to vary materially from current results or the Company’s anticipated future results. Forward-looking information in this
MD&A is based on certain material factors, estimates or assumptions, which may prove to be incorrect, including, but not limited
to assumptions about: general business and current global economic conditions; future success of current research and
development activities; achievement of development milestones; inability to achieve product cost targets; competition; changes to
tax rates and benefits; the availability of financing on a timely basis; the Company’s and competitors’ costs of production and
operations; the Company’s ability to attract and retain skilled employees; receipt of all applicable regulatory approvals/clearances;
protection of the Company’s intellectual property rights; market acceptance of the Company’s product candidates; the Company’s
ability to meet the continued listing requirements of TSX; and that the Helix Risk Factors will not cause the Company’s actual
results or events to differ materially from the forward-looking information. The Company cautions that the foregoing list of important
factors and assumptions is not exhaustive.
For all of the reasons set forth above, which do not represent an exhaustive list of factors that may affect the forward-looking
information, investors should not place undue reliance on forward looking information. The forward-looking information is based
on the beliefs, assumptions, opinions and expectations of the Company’s management at the time they are made, and the
Company does not assume any obligation to update any forward-looking information should those beliefs, assumptions, opinions
or expectations, or other circumstances change, except as required by law.
Data relevant to estimated market sizes in connection with Company’s lead products under development are presented in this
MD&A. These data have been obtained from a variety of published resources, including published scientific literature, websites
and information generally available through publicized means. The Company attempts to source reference data from multiple
sources whenever possible for confirmatory purposes. Although the Company believes the data is reliable, the Company has not
independently verified the accuracy and completeness of this data.
OVERVIEW
Helix is a clinical-stage biopharmaceutical company developing unique therapies in the field of immuno-oncology for the prevention
and treatment of cancer based on its proprietary technological platform DOS47.
The Company is pioneering the development of a platform technology targeting the tumour microenvironment. Helix's technology
is designed to reduce tumour acidity, an escape mechanism which cancer cells utilize to evade the anti-tumour immune response.
Tumour acidity has been shown to correlate with resistance to anti-cancer treatment and poor prognosis for cancer patients.
To date, the Company’s proprietary technology platform, DOS47 has yielded two new drug product candidates, being L-DOS47 and
V-DOS47.
L-DOS47 is currently under clinical study for the treatment of non-small cell lung cancer (“NSCLC”) and previously treated advanced
pancreatic cancer. The Company completed extensive preclinical testing and manufacturing development of L-DOS4, following
which the Company obtained regulatory approvals to conduct a Phase I/II NSCLC monotherapy clinical study in Poland, a Phase I
27
NSCLC combination study with pemetrexed and carboplatin in the United States, and a Phase II NSCLC combination study with
vinorelbine and cisplatin in Ukraine and Poland. In August 2019, the Company also received approval to conduct a Phase Ib/II
combination study utilizing L-DOS47 with doxorubicin in patients with previously treated advanced pancreatic cancer in the United
States.
V-DOS47 drug candidate uses the Company’s proprietary DOS47 technology conjugated to anti-VEGFR2 antibody targeting a wide
range of cancers. In 2016, V-DOS47 was licensed to the Company’s then wholly-owned Polish subsidiary, HIO, for pre-clinical and
clinical development activity. HIO entered into a grant funding agreement with the Polish National Centre for Research and
Development (“PNCRD”) to fund the V-DOS47 research project. On January 30, 2020, HIO conveyed to the PNCRD that it wished
to terminate the grant funding program for V-DOS47. To date the Polish subsidiary under the grant funding agreement received
approximately $1,457,000. As part of the debt cancellation agreements, announced by the Company on June 26, 2020, the
Company and HIO have agreed to terminate both the V-DOS47 license agreement. As a result, all transferred assets related to
V-DOS47 have been automatically reassigned and transferred from HIO back to the Company without any formality. As a result,
the Company will now assess what next steps to take with the V-DOS47 antibody.
In NSCLC, L-DOS47 is shown to be safe and well tolerated as a monotherapy pursuant to the Company’s LDOS002 study
(“LDOS002”). L-DOS47 is also shown to be safe and well tolerated when used in combination with pemetrexed and carboplatin
pursuant to the Company’s LDOS001 study (“LDOS001”). LDOS001 was conducted in University Hospital’s Case Medical Center
in Cleveland, Ohio, Penn State’s Cancer Institute in Hershey, Pennsylvania and at the University of Texas MD Anderson Cancer
Center in Houston, Texas. As reported at the June 2020 conference of the American Society of Clinical Oncology, an objective
response rate of 41.7% based on tumour burden and a clinical benefit rate of 75% inclusive of stable diseases were observed in
the LDOS001 study. The Company believes the data supports the continuing development of L-DOS47 for NSCLC. As of the date
of this MD&A, the Company is contemplating a new study in NSCLC using L-DOS47 in combination with immunotherapy. The
Company is also seeking a partner to further its Phase II study of L-DOS47 in combination with vinorelbine and cisplatin
(“LDOS003”).
In December 2019, the Company announced the start of enrollment and screening for its Phase lb/ll clinical development program
for previously treated patients with advanced pancreatic cancer. The study center is located at HonorHealth in Scottsdale, Arizona.
The Company originally forecasted patient enrollment in the Phase Ib portion of the study to be completed by the end of the 2020
calendar year, pending safety outcomes and the impact of the COVID-19 pandemic. As a result of the COVID-19 pandemic the
Company is not able to meet the previously forecasted patient enrollment timeline for this clinical study. The Company is attempting
to add new clinical sites in other U.S. jurisdictions in order to facilitate patient enrollment. Provided the additional clinical sites can
be up and running by the end of December 2020, the Company believes patient enrollment in the Phase Ib portion of the study may
be completed by the end of the second quarter of calendar year 2021. Please see “Our results of operations may be negatively
impacted by the COVID-19 outbreak” under the heading “Risk Factors”.
In 2017, the Company entered into a scientific research collaboration agreement with the Moffitt Cancer Center (“Moffitt”) in
Tampa, Florida, to perform basic research studies to further investigate the pharmacodynamics of L-DOS47 and to determine the
potential benefits of combining L-DOS47 with immune checkpoint inhibitors. The Company’s collaboration with Moffitt continues
to expand with the recent announcement of a new animal model research project involving the use of L-DOS47 in combination
with immunotherapy in pancreatic cancer. Pancreatic cancer is known to be a disease that is resistant to immunotherapy treatment
and shown in animal models to be highly acidic. The Company believes the ability of L-DOS47 to modulate tumour acidity may be
key to enable immunotherapy treatment for pancreatic cancer. This new research collaboration project will also build on data
already obtained from imaging techniques performed by Moffitt that demonstrated the ability of L-DOS47 to affect tumour acidity.
Translation of this technique into the clinic may help stratify patients for L-DOS47 and potentially identify patients who may be
resistant to certain therapies due to tumour acidity. On August 12, 2020, the Company announced that it had extended its
collaboration agreement with Moffitt Cancer Center for an additional year
In addition to DOS47, the Company has also developed antibodies that may be suitable for novel chimeric antigen receptor T-Cell
therapeutic (“CAR-T”) for solid tumours. In March 2018, the Company announced a scientific research collaboration with ProMab
Biotechnologies Inc. (“ProMab”) to co-develop novel antibody and CAR-T’s for various hematological malignancies and solid
tumours. The first scientific research collaboration between the two parties involves a co-development program for a cell-based
therapy in multiple myeloma. The aim was for both parties to perform various tasks with the objective of filing an IND for testing in
humans by early 2019. The Company’s working capital deficiency through August 2019 pushed out the originally planned timeline
for IND filing. Under the scientific research collaboration agreement with ProMab, the Company retained the rights for the multiple
myeloma CAR-T in Canada and Europe and then sublicensed the European rights to its then wholly-owned subsidiary, HIO, to
further develop and commercialize these technologies in return for future milestone payments and royalty fees. The Company will
provide certain technical and funding support in the early preclinical stages of the multiple myeloma scientific research
collaboration program with ProMab. Under the sublicense agreement between the Company and HIO, HIO was expected to fully
support the clinical development of cell therapy products and has recently applied for government grant assistance in Poland.
In December 2016, the Company signed an exclusive out-license agreement with Xisle Pharma Ventures Trust (“Xisle”) for the
Company's late-stage, Biphasix™ technology platform, including the lead product candidate, interferon alpha. Under the terms of
the agreement, Xisle paid an up-front fee and agreed to pay subsequent milestone payments and royalties to the Company as
28
Xisle advances the technology. As part of the agreement, the Company retained marketing rights for Belarus, Bulgaria, the Czech
Republic, former Eastern Germany, Hungary, Moldova, Poland, Romania, Russia, Slovakia and Ukraine and non-exclusive rights
for co-promotion in Canada. The Company subsequently assigned the foregoing marketing rights which it retained to HIO, its
then wholly-owned subsidiary in Poland, pursuant to an agreement between the Company and HIO.
On June 26, 2020, the Company announced that it had approved, in its capacity as a shareholder of HIO, a direct investment in
HIO by an investor which resulted in the Company’s ownership in HIO being reduced to approximately 42.51% on July 8, 2020.
The direct investment in HIO permitted HIO to apply for a new government grant for the development of the multiple myeloma
CAR-T program in Poland. Subsequent to the year end, on September 3, 2020, HIO closed another direct private placement
resulting in a further dilution of the Company’s holding in HIO from 42.51% as at July 31, 2020 down to 29.89%.
Also, on June 26, 2020, the Company announced the receipt of a non-binding offer from CAIAC, as designated trustee of an
alternative investment fund to be established, to purchase the Company’s remaining shares in HIO. The transaction was initially
expected to close no later than August 31, 2020 but has since been deferred to the end of October 30, 2020, subject to the
satisfaction of certain conditions, including, but not limited to, the negotiation of binding documentation, the receipt of a minimum
of PLN7,300,000 by CAIAC pursuant to a financing, and the receipt of all required regulatory approvals. As of the filing of this
MD&A the Company had not yet closed the transaction with CAIAC though both parties continue to work through the process to
finalize and close the transaction.
On June 26, 2020, the Company also announced the cancellation of intercompany debt in the total aggregate amount of
approximately $2.7 million owed to the Company by HIO. As part of the debt cancellation, both the V-DOS47 and Biphasix™
agreements between the Company and HIO described above were terminated with immediate effect.
The Company has an extensive patent portfolio that includes company owned and licensed patents and pending applications,
including, but not limited to, the use of DOS47 as immunoconjugate for cancer treatment. The Company also has licenses with
the National Research Council of Canada (“NRC”) that cover the use of antibodies for L-DOS47, other DOS47 candidates and
cellular therapy products. Issued patents have coverage in all major pharmaceutical markets including North America, Europe,
and Asia.
The Company currently believes that its growth and future prospects are mainly dependent on the success of its DOS47 drug
product candidates.
During the year, the Company has been in discussions with various capital market firms, both in the U.S. and Canada, with the
goal of raising additional capital to qualify the Company for a listing on a U.S. stock exchange such as NASDAQ.
RESEARCH AND DEVELOPMENT ACTIVITIES
Background
The pH system, with values ranging from 0 – 14, is used to measure acidity (pH < 7) and alkalinity (pH > 7). In general, the human
body exists at a near-neutral pH - neither acidic nor alkaline (basic). In order for cells to function properly, they need the pH both
inside and outside the cell to be neutral. There are some examples, however, where this rule is not followed. For example, the inside
of the stomach is maintained at an acidic pH, as this helps to digest food. The cells lining the stomach have adapted to live in this
acidic environment.
Tumors also exist in an acidic environment. Normal tissues include an extensive network of blood vessels, which deliver oxygen
and nutrients to cells and remove waste products. However, tumors contain an abnormal network of blood vessels. Because of this,
tumors are hypoxic (receive less oxygen than normal tissues) and need to use a non-oxygen requiring form of metabolism to provide
energy for their survival and growth. One side-effect of this type of metabolism is that it generates an excess of hydrogen ions (H+)
inside the cell, and hydrogen ions directly affect pH: the more hydrogen ions there are, the more acidic the inside of the cell becomes.
Since a neutral pH inside the cell is essential for a cell to survive, tumor cells pump the excess hydrogen ions out of the cell. Due to
the abnormal network of blood vessels, the excess hydrogen ions are not efficiently removed from the tumor microenvironment.
Thus, the tumor microenvironment is acidic.
The acidic microenvironment helps promote tumor survival and metastasis in a number of ways. The genes expressed by the tumor
are affected by the acidic microenvironment, which allows tumor cells to adapt. One of these acid-induced changes is to increase
production and release of proteases by tumor cells. The proteases destroy the protein matrix that surrounds the tumor cells, which
makes it easier for the tumor cells to invade local tissues – a first step to metastasis. In addition, the acidic tumor microenvironment
has been shown to impair the activity of immune cells in the tumor, which allows the tumor cells to avoid destruction by the immune
system.
The acidic tumor microenvironment also reduces the efficacy of common cancer treatments. Some chemotherapy drugs, such as
doxorubicin, are weakly basic. The ability of these drugs to enter tumor cells, where they perform their function, is greatly reduced
at acidic pH compared to neutral pH. Radiation therapy also is less effective at an acidic pH than at a neutral pH.
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It is clear that the acidic tumor microenvironment has a profound effect both on tumor biology and current therapies, and that
neutralizing the pH of the tumor microenvironment may have a dramatic impact. One way to reverse extracellular tumor acidity is
to inhibit the proteins that pump hydrogen ions out of tumor cells. One advantage of inhibiting these proteins is that not only is acidity
of the extracellular tumor microenvironment reduced, but acidity inside the tumor cells increases, which has a negative effect on
tumor cell viability. However, targeting these pumps is not easily achieved as many of them exist in multiple forms and some are
critical for the function of normal cells. In addition, since there are several different pumps that regulate pH, inhibition of just one is
generally insufficient to combat tumor acidity.
A more general and theoretically more effective method to neutralize tumor extracellular pH is to use buffers. A variety of orally
administered buffers have been effective in reducing tumor growth and/or metastases in preclinical animal studies. In addition,
buffer therapies have been shown to enhance the activities of chemotherapy and immunotherapy. Although oral sodium bicarbonate
buffer therapy was tested clinically, these trials failed due to poor compliance and moderate adverse effect. However, improved
survival was seen in pancreatic cancer patients undergoing chemotherapy and “alkalization therapy” (produced by changes in diet
and consumption of bicarbonate).
Similarly, an alkaline diet likely improved response to epithelial growth factor receptor – tyrosine kinase inhibitor (EGFR-TKI) therapy
in non-small cell lung cancer (NSCLC) patients. Thus, a change in delivery method may allow for successful buffer therapy.
Consistent with this hypothesis, administration of iv sodium bicarbonate nanoparticles improved doxorubicin efficacy in a preclinical
breast cancer model. In addition, a clinical study was performed in which sodium bicarbonate was administered by local infusion
into the tumor. In this study, hepatocellular carcinoma patients were treated with trans-arterial chemoembolization (TACE) with or
without local bicarbonate. Patients receiving bicarbonate showed a 6-fold lower viable tumor residue, and a randomized controlled
study showed that patients treated with bicarbonate had a higher objective response rate and cumulative overall survival in
comparison to the patients treated with TACE alone.
Alkalization using Urease - DOS47 Platform Technology
Although buffer therapies have the potential to neutralize the acidic tumor microenvironment, local administration of buffers is
generally not feasible. In order to deliver alkalization therapy to tumors, the Company has developed DOS47, a proprietary
technology platform. DOS47 compounds are conjugates of two components: the plant-based urease enzyme and an antibody that
binds to a tumor-specific antigen. The antibody component targets the conjugate to tumors and the urease enzyme converts
endogenous urea into metabolites that include ammonia and hydroxyl ions, thus raising the pH of the tumor microenvironment.
L-DOS47
L-DOS47 includes an antibody that targets carcinoembryonic antigen-related cell adhesion molecule 6 (CEACAM6)
Carcinoembryonic antigen-related cell adhesion molecule 6 (CEACAM6) is a cell surface protein found to be upregulated in several
types of cancer, including NSCLC and pancreatic cancer. In lung adenocarcinoma, CEACAM6 expression has been significantly
associated with adverse clinical outcome. Similarly, the median survival time of pancreatic adenocarcinoma patients with
CEACAM6-positive tumors was significantly shorter than that of patients with CEACAM6-negative disease.
L-DOS47 is composed of the jack bean urease enzyme conjugated to approximately 10 copies of a camelid single-chain anti-
CEACAM6 antibody. The specificity of L-DOS47 for CEACAM6 was confirmed in in vitro binding studies where binding was only
observed to cells that express CEACAM6. Immunohistochemistry studies showed binding of L-DOS47 to lung cancer and
pancreatic cancer tissues, but not to normal tissues. The ability of L-DOS47 to specifically target tumors was confirmed using a
fluorescently-labelled version of L-DOS47. These experiments were performed in a mouse model of lung cancer, and showed that
for 12-72 hours after injection, L-DOS47 was localized at the tumor.
L-DOS47 has been shown to control tumor growth, reduce metastases, and enhance the effect of chemotherapy in animal models
L-DOS47 was tested in two mouse models: one lung cancer and one pancreatic cancer. In both cases, administration of L-DOS47
reduced tumor growth compared to treatment with a control reagent. In addition, when lung cancer cells and L-DOS47 were
premixed and injected into mice, the presence of L-DOS47 reduced the ability of the tumor cells to colonize the lungs. The ability
of L-DOS47 to improve chemotherapy efficacy was observed both in in vitro and in vivo preclinical experiments. In vitro
experiments showed that at an acidic pH, L-DOS47 was able to dramatically increase the cytotoxicity of the weakly basic
chemotherapeutic drug doxorubicin. In addition, a preliminary preclinical study showed that pre-treatment with L-DOS47 24 hours
before doxorubicin delayed tumor growth in mice bearing a CEACAM6-positive pancreatic tumor.
L-DOS47 has been shown to raise the pH of the tumor microenvironment and restore immune-cell activity
Numerous experiments have been performed by the Company which monitored the production of ammonia and increase in pH
when L-DOS47 was combined with urea in vitro. For examples, see Tian et al and UgerError! Bookmark not defined.. The ability
of L-DOS47 to raise the pH of the tumor microenvironment in vivo has been observed in both lung and pancreatic cancer models
using multiple imaging methods including 31P-MRS and MRI-CEST. The Company has performed in vitro experiments with human
30
CD8+ T cells and has observed that culture at acidic pH increased the expression of the immune-downregulatory molecule
programmed cell death protein 1 (PD-1) on the T cells, and that the T cells in acidic conditions reduced their production of the pro-
immune cytokine interferon-gamma (IFN-γ)Error! Bookmark not defined.. L-DOS47 successfully restored the activity of these
cells, as observed by reduced expression of PD-1 and increased production of IFN-γ and another pro-immune cytokine,
interleukin-2 (IL-2)Error! Bookmark not defined.. In one preliminary preclinical experiment, treatment with L-DOS47 enhanced
the ability of an anti-PD1 antibody to control growth of a pancreatic tumor in a mouse model.
CEST MRI of iopamidol for pH imaging [1] of a Panc02 clone 38 SC tumor. (a) T2 weighted image, (b) CEST MRI before
L-DOS47 injection, (c) ~30 minutes after 90 µg/ kg L-DOS47 injection. The difference in mean pHs is 0.38 units. L-
DOS47 was administered iv. Iopamidol was administered SC, next to the tumor.
In summary, these preclinical experiments demonstrate that L-DOS47 successfully targets CEACAM6-expressing tumors, controls
tumor growth, increases the pH of the tumor microenvironment, and is able to improve the efficacy of chemotherapy and
immunotherapies. L-DOS47 is currently being tested in clinical trials of both lung and pancreatic cancers. See “Clinical Programs”
s been published.
V-DOS47
V-DOS47 is the second immuno-oncology drug candidate derived from the Company’s DOS47 technology platform. V-DOS47 is
an antibody-DOS47 conjugate that targets the vascular endothelial growth factor 2 receptor (VEGFR2). VEGFR2 is overexpressed
in breast carcinoma compared with benign breast tissue. In patients with highly estrogen receptor positive (ER+) forms of breast
cancer, the efficacy of tamoxifen treatment negatively correlates with VEGFR2 expression.
CAR-T for solid tumours and hematological malignancies
CEACAM6 specific CARs
Expression of CEACAM6 protein has been reported in a variety of normal human tissues including granulocytes. However, its
expression is elevated in many types of solid tumours such as breast, pancreatic, ovarian, lung and colon. CEACAM6 is envisaged
as a biomarker and potential therapy target for pancreatic ductal adenocarcinoma and pancreatic intraepithelial neoplasia
(Duxbury et al., 2004a, 2004c, 2004d). Recently CEACAM6 is suggested to be check point molecule in multiple myeloma.
The Company believes CEACAM6 specific CAR immune cells may have broad applications in a number of cancer types. The
Company is working on two camelid single domain antibodies that target CEACAM6.
2A3 is a camelid single domain antibody isolated from a whole cancer cell immunized llama library. The antibody binds specifically
to the CEACAM6 antigen with high affinity and inhibits the proliferation of CEACAM6-expressing cancer cells in vitro. The efficacy
of CEACAM6-CAR-T cells in xenograft model was examined in vivo. The results strongly support that CEACAM6-CAR-T cells
can be used as an effective immunotherapy agent against CEACAM6-expressing cancers, and that camelid single domain
antibodies can be easily adopted for CAR-T type therapies.
Vascular epithelial growth factor receptor 2 (VEGFR2) CARs
Most solid tumours and some hematologic malignancies are characterized by an angiogenic phenotype that is an absolute
requirement for tumour survival, progression, and metastasis. Therapeutic approaches targeting molecules involved in tumour
angiogenesis can inhibit tumour growth. Proliferating endothelial cells in the vessels within solid tumours aberrantly express high
levels of angiogenic growth factors, receptors, and adhesion molecules that are absent or barely detectable in established blood
vessels, which are normally quiescent. Among these, VEGF and its receptors appear to be the dominant regulators of
angiogenesis responsible for the vascularization of normal and neoplastic tissues. Overexpression of VEGF and its receptors is
associated with tumour angiogenesis, survival, invasion, metastasis, recurrence, and prognosis in human cancers. VEGF
stimulates angiogenesis mainly through VEGFR-2 (also known as Flk1 in mice and KDR in humans), a tyrosine kinase receptor
that is overexpressed in tumour endothelial cells and on some tumour cells. Pharmacologic approaches to inhibit VEGF, using
monoclonal antibodies or small molecules, are of value in cancer treatment, though the cytostatic rather than cytotoxic nature of
these interventions and the redundancy of angiogenic pathways have limited the curative potential of these treatments. The
Company believes VEGFR2 specific CAR immune cells may have broad applications in a number of cancer types. Helix is working
on two camelid single domain antibodies that target VEGFR2.
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The Company is also leveraging its know-how in manipulating the tumour microenvironment, and its expertise in developing unique
single domain antibody therapeutics to develop CAR-T novel cell-based treatments. Helix intends to develop CARs for ACT for
solid and hematological malignancies. The Company has selected CEACAM6 and VEGFR2 specific CARs for solid tumour. For
hematological malignancies the Company has selected CD19, CD22 and BCMA as potential targets.
ProMab Biotechnologies Inc. (“ProMab”)
On March 16, 2018 the Company entered into a collaboration agreement with ProMab to co-develop novel antibody and chimeric
antigen receptor T-cell therapy (“CAR-T”) that target BCMA to treat multiple myeloma. In this collaboration, the Company retains
commercial rights for this CAR-T in Canada and Europe. The Company entered into a sublicense agreement for BCMA with HIO
whereby the Company will assist in preclinical and early phase clinical planning of the BCMA project. The Company’s assistance
includes funding a certain portion(s) of the preclinical development stage while HIO leads the regulatory and clinical development
of the product in Europe. These activities are expected to be coordinated with ProMab who will be developing the product for Asia
and the U.S.A. The Company retains the rights for Canada.
The BiphasixTM Topical Formulation System
The Biphasix™ Topical Formulation System is a platform technology which the Company acquired and further developed for
microencapsulating therapeutic compounds in multilayered, lipid-based microvesicles. These microvesicles have complex
structures that include a variety of compartments into which drug molecules can be integrated. The principal application of the
technology is in the preparation of topical dosage forms for the dermal (into the skin) or mucosal (into the mucosal tissues) delivery
of large molecular weight drug compounds.
Clinical Programs
The Helix clinical program for L-DOS47 currently includes four clinical trials. Three clinical studies involve the treatment of NSCLC:
A Phase I combination study (LDOS001) conducted in the U.S., a Phase I/II monotherapy study concluded in Poland (LDOS002),
and a Phase II combination study running in Eastern Europe (LDOS003). A fourth clinical trial, a Phase Ib/II study (LDOS006)
investigating the treatment of metastatic pancreatic adenocarcinoma, received regulatory approval and is currently being
conducted in the U.S.
LDOS001 – A Phase I Combination Therapy Trial in Lung Cancer
LDOS001 was a Phase I, open label, dose escalation study of L-DOS47 in combination with standard doublet therapy of
pemetrexed/carboplatin in patients with stage IV (TNM M1a and M1b) recurrent or metastatic non-squamous NSCLC. Patients
received standard of care doses of pemetrexed [500 mg/m2] and carboplatin [AUC6], respectively, on Day 1 of a 3-week cycle, in
combination with L-DOS47 (starting dose 0.59 µg/kg), administered weekly. The objective of the study design was to evaluate
safety and tolerability, as well as determine the maximum tolerated dose (“MTD”) of L-DOS47, in combination treatment.
Fourteen (14) patients were enrolled across six dosing cohorts, starting at 0.59 and increasing up to 9.0 µg/kg. The MTD was not
achieved as none of the patients experienced any dose-limiting toxicity (“DLT”). Fifty percent (50.0%) of patients experienced at
least one treatment emergent adverse event assessed as study drug-related, with 14.3% of patients experiencing at least one
grade 3/4 drug-related toxicity. Although the study was not designed specifically to assess efficacy, preliminary results showed
that of 12 patients evaluable for efficacy, five patients (41.7%) had a partial response (“PR”), four patients (33.3%) experienced
stable disease (SD) and three patients (25.0%) had progressive disease (“PD”). The objective response rate was 41.7%, with a
clinical benefit rate of 75.0%.
L-DOS47, in combination with pemetrexed/carboplatin, was well tolerated with promising anti-tumour activity against non-
squamous NSCLC.
LDOS001 Phase I Best Overall Response Summary Efficacy Evaluable(N=12)
L-DOS47 (All Dosing Cohorts) + Pemetrexed/Carboplatin
Best Overall Response
Number of Patients1
Complete Response (CR)
Partial Response (PR)
Stable Disease (SD)
Progressive Disease (PD)
Overall
12
0 (0%)
5 (41.7%)
4 (33.3%)
3 (25.0%)
1 Number of patients used as denominator to calculate percentages.
LDOS002 – A Phase I/II Monotherapy Trial in Lung Cancer
LDOS002 was a Phase I/II open-label, non-randomized, dose escalation study of L-DOS47 as a monotherapy in adult subjects
with inoperable, chemo-naïve or refractory Stage IIIb or IV non-squamous NSCLC. The primary objectives of the Phase I portion
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of the study was to evaluate safety and tolerability of ascending doses of L-DOS47 and define the MTD. Patients received weekly
doses of L-DOS47, administered as an intravenous infusion over 14 days, followed by seven days' rest (where one treatment
cycle is three weeks).
Despite a total of 55 patients being dosed across 16 dose levels ranging from 0.12 up to 13.55 μg/kg, the MTD was not reached.
There was only one single DLT of spinal/bone pain reported at the 5.76 μg/kg dose level. The weekly dosing schedule of L-DOS47
for all doses up to 13.55 μg/kg was otherwise well tolerated and most adverse events reported were typical of the population under
study. L-DOS47 did not elicit a dose-dependent release of cytokines at doses up to13.55μg/kg. Time of maximum observed
plasma drug concentration after dosing (“Tmax”) was consistent across dose levels and treatment cycles, occurring within the first
hour following the L-DOS47 infusion. There were no safety issues beyond those already observed in pre-clinical toxicology studies
or expected in the population of patients being studied.
A dose response trend was observed when comparing the percentage of patients who were progression-free at 16 weeks across
dose ranges, according to Response Evaluation Criteria in Solid Tumours (“RECIST”) version 1.1. A similar trend was observed
when comparing the percentage of patients who had stable disease and had a reduction in target lesions.
L-DOS47 Monotherapy dose response in cohorts
In the Phase II portion of the study, the objective was to make a preliminary assessment of efficacy for L-DOS47 given as
monotherapy. Enrolling subjects in the same patient population as in Phase I, patients were dosed at 13.55µg/kg, twice weekly
over 14 days, followed by seven days’ rest. A total of 21 patients were dosed in the first stage of the Phase II component of the
study.
Despite an intensified L-DOS47 monotherapy dosing regimen, evaluation of initial results did not yield ≥1 partial or complete
response at any time point as defined by protocol. The Phase II component of the study did not proceed to Phase II, Stage 2 and
the development of L-DOS47, as monotherapy treatment of non-squamous, NSCLC was discontinued. Based on the efficacy
results of the Phase I/II monotherapy study, Helix is pursuing Phase II studies in combination with therapies that may benefit from
the pH-modulating effects of L-DOS47 on solid tumours that express CEACAM6.
LDOS003 – A Phase II Combination Therapy Trial in Lung Cancer
LDOS003 is a Phase II, open-label, randomized study of L-DOS47 in combination with vinorelbine/cisplatin vs vinorelbine/cisplatin
alone in patients with lung adenocarcinoma. Vinorebine/cisplatin chemotherapy combination in the U.S. has become infrequent
due to the rapidly evolving treatment landscape and the growing prominence of immunotherapies such as Keytruda®. The
Company commenced this study based on the use of vinorebine/cisplatin chemotherapy combinations in Eastern European and
Asian markets.
Patients who receive L-DOS47 will be dosed on Days 1 and 8 of each 21-day treatment cycle, along with standard
vinorelbine/cisplatin chemotherapy for a total of four treatment cycles. The study is divided into two parts. Part I applies a standard
3 + 3 algorithm for dose escalation to determine the L-DOS47 maximum tolerated dose when given in combination with
vinorelbine/cisplatin. Cohorts of three patients will be recruited into three dosing cohorts (6, 9 and 12 µg/kg). All patients at a given
dosing cohort must complete the first treatment cycle (3-week period) before escalation in subsequent patients can proceed. The
decision for escalation to the next dose level will be made after the safety data have been reviewed by the Trial Steering Committee
(TSC). If a patient in any cohort experiences a DLT, an additional three patients will be enrolled, for a maximum of up to 18 patients
in this initial dose escalation part of the study.
In Part II, after the maximum tolerated dose of L-DOS47 in combination with vinorelbine/cisplatin has been determined, a further
118 patients will be randomized (1:1) to receive L-DOS47 in combination with vinorelbine/cisplatin, or vinorelbine/cisplatin alone.
33
Efficacy will be assessed by time to progression (time from first day of study drug administration to documented disease
progression), response rate (proportion of patients with a best overall response of complete response and partial response
according to RECIST v. 1.1), and overall survival (time from first day of study drug administration to death due to any cause).
Monitoring will include radiological evaluations every second cycle. Safety and tolerability of L-DOS47 in combination will also
continue to be evaluated.
For all patients, treatment will continue either until the patient experiences disease progression, unacceptable toxicity, the patient
withdraws consent or has completed four treatment cycles. Patient recruitment began in February 2019. To date, the first two
cohorts (6 and 9 µg/kg) in Part I of the study have been completed. Two (2) patients have also been dosed at 12 µg/kg. The third
cohort has not been completed due to a hold on recruitment due to a shortage in the required vinorelbine dosages from the
manufacturer. As shortages of required vinorelbine dosages from the manufacturer are expected to continue through to 2021, the
Company has made the decision to terminate further recruitment and proceed to data analysis. The Company has therefore
determined that it will not be moving forward with Part II of the study unless certain clinical objectives are met in Part I of the study
and sufficient capital is obtained, or the Company enters into a co-development partnership with a third party.
LDOS006 – A Phase Ib/II Combination Trial in Pancreatic Cancer
The Company received FDA approval in August 2019 to initiate a new study of L-DOS47 in the treatment of pancreatic cancer.
This is an open label, non-randomized study designed to evaluate the safety, tolerability and preliminary anti-tumour activity of L-
DOS47 in combination with doxorubicin in patients aged ≥ 18 years old with metastatic pancreatic cancer who have progressed
on at least two prior treatment regimens. The trial was initiated in November 2019 and the first patient dosed in December 2019.
The Phase Ib part of the study applies a standard 3 + 3 algorithm for dose escalation to determine the L-DOS47 maximum tolerated
dose to use in combination with doxorubicin for the Phase II part of the study. Patients are recruited into three cohorts where each
cohort receives increasing weekly dose levels of L-DOS47 in combination with a fixed dose of 20 mg/m2 of doxorubicin weekly,
with four weeks making up one treatment cycle up to a maximum of six cycles. The decision for escalation to the next dose level
will be made after all patients in a cohort have completed four weeks of combination treatment and the safety data have been
reviewed by the Safety Review Committee. If a patient in any cohort experiences a dose limiting toxicity, an additional three
patients will be enrolled, for a maximum of up to 18 patients in this initial dose escalation part of the study.
The Phase II part of the study will focus on evaluating preliminary anti-tumour activity, as well as continuing to evaluate safety and
tolerability of L-DOS47 in combination with doxorubicin. A further 11 additional patients will be enrolled in this phase of the study.
Patients will be initiated on the L-DOS47 dose determined in Phase I, in combination with 20 mg/m2 doxorubicin, with tumour
marker carbohydrate antigen 19-9 (CA19-9) measurements at each treatment cycle, and radiological assessments every two
treatment cycles. Tumour response will be assessed according to RECIST version 1.1. Safety will be assessed by reported
adverse events (AEs), serious adverse events (SAEs), physical exams, vital signs, Karnofsky Performance Status,
electrocardiogram (ECG), echocardiogram (ECHO)/multi-gated acquisition scan (MUGA), clinical laboratory evaluations
(hematology, chemistry, coagulation and urinalysis), and anti-L-DOS47 antibody levels. Currently a total of five (5) patients have
been dosed, three (3) of whom withdrew due to disease progression prior to completing the required 4-week cycle in order to be
included in the evaluation for dose escalation. One more patient completing the 4-week cycle will be required to close cohort 1.
Due to slower enrolment related to challenges resulting from COVID-19 pandemic measures, an additional two (2) are being
added to boost study enrolment. One site has initiated study start-up activities, while a second site is currently in the site
qualification process.
Given the Company’s limited current cash resources and the possibility of not being able to obtain additional financing on a timely
basis, the Company may be required to reduce, delay or cancel one or more of its planned research and development programs,
including clinical studies.
Manufacturing
L-DOS47 is an immunoconjugate drug composed of single chain antibody molecules specific for carcinoembryonic antigen-related
cell adhesion molecule 6 (CEACAM6) that are cross-linked with a purified urease derived from the jack bean plant (Canavalia
ensiformis).
The urease component is extracted from jack beans through a multistage process that yields an enzyme with high activity and
purity. The llama-derived recombinant antibody is manufactured in E. coli and the purified antibodies are covalently linked to the
urease enzyme by a chemical cross-linker into L-DOS47 drug substance. The drug substance is filled and lyophilized into the final
L-DOS47 drug product for use in the clinic. Helix has extensively characterized L-DOS47 and maintains a comprehensive
analytical program for the drug substance, drug product, and the urease and antibody intermediates.
Helix also manufactures its own 1% Polysorbate 80 diluent, which is co-mixed with L-DOS47 in order to prevent protein adsorption
to the saline bags and IV tubing that are used to administer the drug to patients in the clinic.
Manufacturing, release, and stability testing of L-DOS47 and the 1% Polysorbate diluent is currently conducted by contract
manufacturing organizations (“CMO”) and contract testing laboratories (“CTL”) in Canada and the U.S. Helix requires all CMO and
34
CTL’s to maintain compliance with current Good Manufacturing Practice (“cGMP”) and to be licensed by the national regulatory
authority in their jurisdiction. Helix employees and consultants provide technical, quality, and regulatory oversight for all operations
related to L-DOS47 production. Currently, Helix has service and quality agreements with several CMO/CTL for clinical-stage
manufacturing, testing, and release of the L-DOS47 drug substance and drug product and the 1% Polysorbate diluent.
The Company’s current supply of L-DOS47 drug product continues to be subjected to stability assays every six months. The next
stability assay has been scheduled for November 2020 with a final batch testing scheduled for May 2021 after which time the
Company will not have any additional stability samples available to further extend the current L-DOS47 drug product batch beyond
May 2021. The CMO that manufactured the current L-DOS47 drug substance informed the Company in early 2019 that it would
no longer be able to manufacture L-DOS47. In September 2019, the Company signed an agreement with another CMO to
repurpose a drug substance batch the Company had kept in reserve. The Company completed the reprocessing of a drug
substance batch in June 2020 and, subject to the approval of various quality assurance tests which are expected to be completed
in November 2020., the drug substance will be transferred to another CMO for lyophilization. The Company expects the
lyophilization process to be completed December 2020, pending final approval of various quality assurance tests after which time
the new batch of L-DOS47 drug product will be labelled and packed for use in the Company’s ongoing clinical studies.
The Company has also been in discussion with the new CMO to plan out a technology transfer to manufacture a new batch of L-
DOS47 drug product. No commitment has been made to date.
In the event that any of the stability assays (current batch or new production batch) do not pass quality assurance tests, the
Company’s clinical studies and any planned research and development programs would likely face delays and possibly be
cancelled which could impair the current and future value of the business.
Product Focus
The following table sets forth the current status and future research and clinical development activities relating to L-DOS47 and
the anticipated timing thereof:
1) subject to preclinical data support, financial constraints, and possible third-party collaboration
2) Subject to favourable Phase I/II and financing constraints.
Strategy
We are focused on the development and commercialization of L-DOS47 as a potential therapy for NSCLC and pancreatic cancer.
The key elements of our strategy, our expected timelines to achieve our strategic objectives, and the assumptions upon which
such statements are made are as follows:
Last patient enrollment for the Company’s L-DOS47 Phase Ib pancreatic study is anticipated by the second quarter of
calendar year 2021 with new clinical sites added and provide the study is not impeded by the COVID-19 pandemic, a
potential severe adverse event that requires an increased number of patients to be enrolled from what is currently planned
and/or dose limiting toxicities;
Provided the Phase Ib portion of the Company’s L-DOS47 pancreatic study is completed as planned, the Company
expects patient enrollment for the Phase II portion of the study to then commence immediately with the last patient
enrolled by November 2021 (unlike the Phase Ib study where new patient enrollment must be completed sequentially,
the Phase II portion of the trial allows for multiple patient enrollment all at once);
35
The initiation of a Phase III pivotal study of the Company’s L-DOS47 in pancreatic late in 2022 (assumes the successful
completion of the Phase Ib/II study and the achievement of all study objectives);
Provided current pre-clinical research activity, both inhouse and in collaboration with Moffit Cancer Center show sufficient
evidence, the Company will look to apply for a new NSCLC Phase II clinical study with L-DOS47 in combination with
immunotherapy;
Provided current pre-clinical research activity, both inhouse and in collaboration with Moffit Cancer Center show sufficient
evidence, the Company will look to expand the utility of L-DOS47 not only in combination with immunotherapy in
pancreatic cancer some time in early 2023 but for other possible indications;
Commercialization
The Company’s DOS47 commercialization objective is to eventually enter into a strategic partnering alliance with a large
pharmaceutical company, on an individual or multiple drug candidate basis, such as L-DOS47 or any potential new DOS47 drug
product candidate. The Company has retained Deloitte Corporate Finance as its strategic advisor to explore partnering and
licensing opportunities. The intention of Company is to enter a structured process that will include preparing the Company to have
discussions with potential partners, engaging in dialogue with a targeted group of qualified partners and licensees, and entering
negotiations on a prospective partnership, alliance or licensing transaction. In the meantime, the Company will continue to gather
as much value-adding clinical data/findings, which demonstrate the safety and efficacy of L-DOS47 in patients or any other new
potential DOS47 drug candidate so as to maximize value for shareholders when entering into a strategic partnering alliance.
Market and Competition
Non small cell lung cancer
Treatment options for metastatic NSCLC have changed significantly in the last few years due to the clinical success of
Immunotherapies such as immune checkpoint inhibitors that target PD-1 or its ligands. On March 4, 2015 the FDA approved
Nivolumab, the generic name for the trade drug named Opdivo®, which targets PD-1 for the treatment of metastatic squamous
NSCLC with progression on or after platinum-based chemotherapy. On October 2, 2015, the FDA granted accelerated approval
for Pembrolizumab, the generic name for the trade drug named Keytruda®, which targets PD-1 to treat patients with advanced
metastatic NSCLC with tumours that express PD-L1 whose disease has progressed after treatment.
As of March 2017, the FDA had approved five checkpoint inhibitor drugs: ipilimumab (Yervoy®), pembrolizumab (Keytruda®),
nivolumab (Opdivo®), atezolizumab (Tecentriq®) and avelumab (Bavencio®).
On May 10, 2017, the FDA granted accelerated approval to pembrolizumab (Keytruda®, Merck and Co., Inc.) in combination with
pemetrexed and carboplatin for the treatment of patients with previously untreated metastatic NSCLC. Approval was based on a
cohort (G1) of patients enrolled in an open-label, multicenter, multi-cohort study (KEYNOTE-021).
Pancreatic Cancer
Treatment options for late stage metastatic pancreatic cancer patients are limited. Surgery and radiation are used only for symptom
relief and chemotherapy remains the primary mode of therapy. Gemcitabine is widely used either alone or in combination with
erlotinib (Tarceva), capecitabine, cisplatin or nab-paclitaxel. Other chemo-cocktails are also possible depending on patient
tolerability to such cocktails and physican choice of best suitable care. If these lines of therapy are not effective, other combinations
such as oxaliplatin and fluoropyrimidine may be used.
Technological competition from pharmaceutical companies, biotechnology companies and university researchers is intense and
is expected to continue. While the Company is not aware of any other competitors in clinical development of a therapy that targets
tumour acidosis, some potential competitors have substantially greater product development capabilities and financial, scientific,
marketing and human resources than the Company. See “The Company faces risks in connection with competition and
technological change” under the heading “Risk Factors”.
SELECTED FINANCIAL INFORMATION
The Company reported a total net loss and total comprehensive loss of $9,174,000 ($0.07 loss per common share) and
$7,526,000 ($0.07 loss per common share), for fiscal year 2020 and 2019, respectively. Of the total net loss and total
comprehensive loss in fiscal 2020, $189,000 is related to the non-controlling interest in HIO.
Fluctuations in total net loss and total comprehensive loss is mainly the result of the Company’s cash reserves available to be
deployed on ongoing research and development activities and operating, general and administration expenses.
The Company experienced a working capital deficiency throughout fiscal 2018 and 2019 until August 21, 2019 when the Company
closed the first of a series of private placements for total gross proceeds of approximately $16,000,000. A portion of the private
36
placement financings included the total disposition of a 49.0% stake in HIO. On July 8, 2020 HIO completed a direct Series B
private placement which resulted in a dilution of the Company’s holding in HIO down to 42.51% as at July 31, 2020. Subsequent
to the Company’s fiscal 2020 year-end on September 3, 2020 HIO completed a direct Series C private placement with another
investor which resulted in a further dilution of the Company’s holding in HIO down to 28.89%. See SUBSEQUENT EVENTS
section below.
The following table depicts selected annual data previously reported for the fiscal years ended:
2020
2019
2018
9,174,000
Total net loss & total comprehensive loss
$
189,000
Net loss & total comprehensive loss related to non-controlling interest $
8,985,000
$
Total net loss & total comprehensive loss attributable to Helix
$ (180,516,000)
Deficit
587,000
$
Non-controlling interest
Basic and diluted loss per common share
Weighted average number of common shares
Cash
Working capital / (deficiency)
Total assets
RESULTS FROM OPERATIONS
Net loss from continuing operations
$
$
$
$
0.07
127,712,446
4,235,000
2,735,000
4,906,000
7,526,000
$
–
$
7,526,000
$
$ (171,531,000)
–
$
$
$
$
$
0.07
106,645,801
206,000
(3,534,000)
940,000
8,625,000
$
–
$
8,625,000
$
$ (164,005,000)
–
$
$
$
$
$
0.09
99,928,708
366,000
(1,901,000)
1,147,000
The Company recorded a net loss and total comprehensive loss from continuing operations of $8,561,000 ($0.07 loss per common
share) and $6,807,000 ($0.07 loss per common share) for the fiscal years ended 2020 and 2019, respectively.
Research & development
Research and development expenses for fiscal 2020 totalled $5,868,000 (2019 - $4,948,000).
The following table outlines research and development costs expensed and investment tax credits for the Company’s significant
research and development projects for the fiscal years ended July 31:
L-DOS47
CAR-T
Corporate research and development expenses
Trademark and patent related expenses
Stock-based compensation expense
Amortization of property, plant and equipment
Amortization of right of use assets
Research and development investment tax credits
2020
$ 4,715,000
64,000
393,000
516,000
117,000
54,000
129,000
(120,000)
2019
$ 3,530,000
333,000
531,000
435,000
197,000
48,000
–
(126,000)
$ 5,868,000
$ 4,948,000
L-DOS47 research and development expenses for fiscal 2020 totalled $4,715,000 (2019 - $3,530,000). L-DOS47 research and
development expenditures relate primarily to the Company’s LDOS001 Phase I clinical study in the U.S., the LDOS003 Phase II
clinical study in Poland and the Ukraine and the Company’s new LDOS006 Phase Ib/II pancreatic clinical study in the U.S.
For fiscal 2020 when compared to fiscal 2019 the increase in spending mainly reflects drug substance manufacturing spend of
$590,000, costs associated with the new LDOS006 pancreatic trial in the U.S. of $1,144,000 and costs associated with finalizing
and reporting on LDOS001 of $168,000. Offsetting the increased spend was a reduction in spending of $354,000 related to the
Company’s LDOS003 and a further reduction of $278,000 related to the Moffitt Cancer Centre research collaboration.
The supporting L-DOS47 expenditures include costs associated with the Company’s research laboratory in Edmonton, Alberta,
Canada which includes employee wages and benefits, fixed overhead costs such as rent, light, heat, water and variable costs
such as laboratory consumables. Also included are costs associated with the manufacture of L-DOS47 drug substance/product
and related assays from third party suppliers and costs associated with running and managing the L-DOS47 clinical trials in the
various geographic jurisdiction. These include wages and benefits of employees involved in overseeing third-party vendors who
monitor the trials on behalf of the Company in addition to all patient clinical study costs incurred at the various clinics where
patients are being dosed.
37
CAR-T research and development expenses for fiscal 2020 totalled $64,000 (2019 - $333,000). The Company’s collaboration
with ProMab Biotechnologies Inc. (“ProMab”) has been impacted by the Coronavirus pandemic and as such certain planned
activities have been deferred.
Trademark and patent related expenses for fiscal 2020 totalled $516,000 (2019 - $435,000). The Company continues to ensure
it adequately protects its intellectual property.
Stock based compensation expense for fiscal 2020 totalled $117,000 (2019 - $197,000). The amount represents the expense
associated with the vesting of stock options that were granted, over their vesting period.
Operating, general and administration
Operating, general and administration expenses for fiscal 2020 totalled $2,748,000 (2019 - $1,827,000). The increase is mainly
the result of higher expenses associated with various third-party advisor services such as investor and media relations, legal,
business development activities and investment banking services.
During the year, the Company has been in discussions with various capital market firms, both in the U.S. and Canada, with the
goal of raising additional capital to qualify the Company for a listing on a U.S. stock exchange such as NASDAQ.
The following table outlines operating, general and administration costs expensed for the fiscal years ended July 31:
Wages & benefits
Director fees
Third-party advisors
Other general and administrative
Stock-based compensation expense
Amortization of property, plant and equipment
Amortization of right of use assets
$
2020
434,000
174,000
1,419,000
339,000
353,000
3,000
26,000
$ 2,748,000
$
2019
493,000
162,000
762,000
239,000
164,000
7,000
–
$ 1,827,000
Stock based compensation expense for fiscal 2020 totalled $353,000 (2019 - $164,000). The amount represents the expense
associated with the vesting of stock options that were granted, over their vesting period.
Net loss from discontinued operations
The Company reported a net loss from discontinued operations of $613,000 and $719,000, respectively for the fiscal 2020 and
2019, respectively.
During the year, the Company disposed of a 57.49% ownership in its Polish subsidiary, Helix Immuno-Oncology S.A. (“HIO”),
bringing the Company’s total ownership interest in HIO as at July 31, 2020 to 42.51%. On June 26, 2020, the Company made
the following announcements relating to its Polish subsidiary:
• Entered into agreements with HIO, pursuant to which the Company cancelled an aggregate amount of approximately
$2.7 million of intercompany debt owed to the Company by HIO. As a result, all transferred assets related to Biphasix
and V-DOS47 have been automatically reassigned and transferred from HIO back to the Company without any formality.
The Company has also ceased financing HIO with immediate effect.
•
•
The Company approved an increase in share capital of HIO and the issuance of up to 2.2 million Series B ordinary shares
in the capital of HIO to enable it to issue up to 2.2 million Series B ordinary shares by way of a private placement financing
for aggregate gross proceeds of approximately 2.97 million Polish zloty. HIO completed the private placement on July 8,
2020 and as a result the Company's shareholding in HIO has been reduced to approximately 42.51% of the outstanding
shares of HIO.
The Company accepted a non-binding term sheet offer from CAIAC Fund Management AG, in its capacity as designated
trustee of an alternative investment fund that at the time was in the process of being established and authorized by the
Financial Market Authority in Liechtenstein (“FMA”). The terms of the offer provide for the Company to sell its remaining
holdings in HIO for gross proceeds of 6.7 million Polish zloty (approximately $2.3 million). The transaction was scheduled
to close on Aug. 31, 2020, but has since been deferred to the end of October 30, 2020, and is subject to a number of
conditions, including the approval of the fund by the FMA; the raising of a minimum 7.3 million Polish zloty by the fund
as well as regulatory approval of the transaction, if required. As of the filing of this MD&A the Company has not yet closed
the transaction with CAIAC though both parties continue to work through the process to finalize and close the transaction.
There can be no assurance that the closing of the divestment will occur on the terms set out herein or at all.
38
Subsequent to the Company’s fiscal 2020 year-end on September 3, 2020, HIO directly closed a Series C financing
which further diluted the Company’s holding in HIO from 42.51% down to 29.89%.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and
expenses and the related disclosures of contingent assets and liabilities and the determination of the Company’s ability to continue
as a going concern. Actual results could differ materially from these estimates and assumptions. The Company reviews its
estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are
revised and may impact future periods.
The Company has also assessed the impact of COVID-19 on estimates and critical judgement. Although the Company expects
COVID-19 related disruptions to continue into the Company’s fiscal 2021 year, the Company believes that the long-term estimates
and assumptions do not require significant revisions. Although the Company determined that no significant revisions to such
estimates, judgements or assumptions were required, the pandemic is fluid and given the inherent uncertainty at this time,
revisions may be required in future periods to the extent that the negative impacts on the Company’s business operations arising
from COVID-19 continue or become worse. Any such revision could result in a material impact on the Company’s financial
performance and financial condition.
The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
Company’s financial statements have been set out in Note 1 of the Company’s consolidated financial statements for the fiscal year
ended July 31, 2020.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in preparing the Company’s consolidated financial statements are described in Note 2 of
the Company’s audited consolidated financial statement for the fiscal year ended July 31, 2020, except for those related accounting
policies and methods of computation related to any new accounting standards and pronouncements.
NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS NOT YET ADOPTED
There are no new accounting standards and pronouncements issued but not yet effective up to the date of issuance of the
Company's interim consolidated financial statements that are expected to have a material impact on the Company.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has mainly relied on financing its operations from public and private sales of equity. The Company
does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants. The
Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company reported a consolidated net loss and total comprehensive loss of $9,174,000 for the fiscal year ended July 31,
2020 (July 31, 2019 - $7,526,000). As at July 31, 2020 the Company had working capital of $2,735,000, shareholders’ equity of
$2,981,000, a deficit of $180,516,000. As at July 31, 2019 the Company had a working capital deficiency of $3,534,000,
shareholders’ deficiency of $3,281,000 and a deficit of $171,531,000.
The Company experienced a working capital deficiency throughout fiscal 2018 and 2019 until August 21, 2019 when the Company
closed the first of a series of private placements for total gross proceeds of approximately $16,000,000. A portion of the private
placement financings included the total disposition of a 49.0% stake in HIO. On July 8, 2020 HIO completed a direct Series B
private placement which resulted in a dilution of the Company’s holding in HIO down to 42.51% as at July 31, 2020.
The Company previously disclosed its intentions to fully divest its interest in its Polish subsidiary in order to raise additional capital
to further fund the Company’s clinical development programs while still retaining licensing arrangements for future royalties and
milestone payments.
On June 26, 2020, the Company announced the receipt of a non-binding offer from CAIAC, as designated trustee of an alternative
investment fund to be established, to purchase the Company’s remaining shares in HIO. The transaction was initially expected to
close no later than August 31, 2020 but has since been deferred to the end of October 30, 2020, subject to the satisfaction of
certain conditions, including, but not limited to, the negotiation of binding documentation, the receipt of a minimum of PLN7,300,000
by CAIAC pursuant to a financing, and the receipt of all required regulatory approvals. As of the filing of this MD&A the Company
had not yet closed the transaction with CAIAC though both parties continue to work through the process to finalize and close the
transaction. There can be no assurance that the closing of the divestment will occur on the terms set out herein or at all.
39
In addition, the Company has been in discussions with various capital market firms, both in the U.S. and Canada, with the goal of
raising additional capital to qualify the Company for a listing on a U.S. stock exchange such as NASDAQ in order to further
advance the Company’s clinical development programs.
In order for the Company to advance the various planned preclinical and clinical research and development activities, its
collaborative scientific research programs and pay for its overhead costs, the Company will need to raise approximately
$15,000,000 to $20,000,000. The Company projects an average monthly fixed overhead spend of approximately $375,000. This
amount does not include the costs related to any of the Company’s third-party activities such as clinical studies, collaborative
research activities, contract manufacturing and any of the additional costs associated with the Company’s objective to list on the
Nasdaq.
The Company currently has several clinical studies (see Clinical Study Initiatives above for details) in various stages of
development. Due to slow enrollment, the Company stopped LDOS001 enrollment and has been working on the final clinical
study report. The Company is forecasting approximately $408,000 to fully complete the study and report. The Company previously
forecasted LDOS003 as a large randomized study but concluded that it would not move forward with the randomized portion of
the study unless the Company entered into a co-development partnership with a third party. The Company is forecasting
approximately $547,000 to fully complete the study and report.
The Company received IND approval by the FDA to conduct a Phase Ib/II study (LDOS006) in the U.S., L-DOS47 in combination
with doxorubicin, for previously treated advanced pancreatic cancer. Patient enrollment commenced December 2019. The
Company is forecasting a cost of approximately $4,875,000 through to the end of fiscal 2022.
The Company is forecasting approximately $3,200,000 in manufacturing activity over the next two fiscal years in support of the
Company’s clinical study programs. Originally the Company determined that it would likely need an entirely new manufacturing
batch but has since determine that a current drug substance batch could be repurposed and ready for use in early 2021. The
remaining cost to repurpose the batch including lyophilization is projected to cost approximately $646,000. In addition, the
Company is forecasted the manufacturing of a new batch of 1% Polysorbate diluent at a cost of approximately $238,000. The
bulk of the remaining manufacturing cost over the next two fiscal years relates to the technology transfer of L-DOS47 to a new
manufacturer with the transfer projected to be complete in late 2021 and a cost of approximately $1,552,000.
The Company is currently forecasting to spend approximately $1,394,000 in collaborative research initiatives with both ProMab
and the Moffit Cancer Centre.
The Company’s cash reserves of $4,235,000 as at July 31, 2020 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see planned research and development
initiatives through to completion. Though the funds raised have assisted the Company in dealing with its working capital deficiency,
additional funds are required to advance the Company’s clinical and preclinical programs and deal with working capital
requirements To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations,
management considers securing additional funds, primarily through the issuance of equity securities of the Company, to be critical
for its development needs.
The Company’s long-term liquidity depends on its ability to raise funds from various sources, which depends substantially on the
success of its ongoing research and development programs, economic conditions and the state of the biotech industry.
Accessing the capital markets can be particularly challenging for companies that operate in the biotechnology industry. While the
Company has been able to raise equity financing in recent years, there can be no assurance that additional funding by way of
equity financing will continue to be available. Any additional equity financing, if secured, would result in dilution to the existing
shareholders and such dilution may be significant. The Company may also seek additional funding from or through other sources,
including technology licensing, co-development collaborations, mergers and acquisitions, joint ventures, and other strategic
alliances, which, if obtained, may reduce the Company’s interest in its projects or products or result in significant dilution to existing
shareholders. The Company may also seek additional funding from government grants. The Company is also assessing the
possibility of a Nasdaq listing in order to reach the U.S. capital markets for funding. There can be no assurance, however, that
any alternative sources of funding will be available. The failure of the Company to obtain additional financing on a timely basis
may result in the Company reducing, delaying or cancelling one or more of its planned research, development and/or marketing
programs, including clinical trials, further reducing overhead, or monetizing non-core assets, any of which could impair the current
and future value of the business or cause the Company to consider ceasing operations and undergoing liquidation.
Given the Company’s conclusion about the insufficiency of its cash reserves, significant doubt may be cast about the Company’s
ability to continue operating as a going concern. The continuation of the Company as a going concern for the foreseeable future
depends mainly on raising sufficient capital, and in the interim, reducing, where possible, operating expenses (including making
changes to the Company’s research and development plans), including the delay of one or more of the Company’s research and
development programs, further reducing overhead and the possible disposition of assets.
The Company had a total number of 132,933,017 common shares issued and outstanding as at July 31, 2020 (July 31, 2019 –
111,225,501).
40
RELATED PARTY TRANSACTIONS
The following table summarizes key management personnel compensation for the fiscal years ended:
Compensation
Stock-based compensation
2020
586,000
147,000
$
2019
$ 767,000
291,000
$
733,000
$ 1,058,000
An amount of $225,000 was advanced to the Company by an officer. The advance is interest bearing at 4% per annum and is
repayable, on demand, no later than August 30, 2019. The principle amount along with interest, was repaid, as per terms. The
advance is included in accruals as at July 31, 2019. The amount was fully paid back along with interest by August 30, 2019.
The following table summarizes non-management directors’ compensation for the fiscal years ended:
Directors’ fees
Stock-based compensation
$
2020
174,000
280,000
2019
$ 162,000
24,000
$
454,000
$ 186,000
The following table summarizes the total compensation for both ACMest and ACMag for the fiscal years ended:
Finder’s fee commissions
Investor relations consulting fee
2020
$ 2,000,000
548,000
2019
$ 940,000
571,000
$ 2,548,000
$ 1,511,000
The Company has agreements with both ACM Alpha Consulting Management EST (“ACMest”) and ACM Alpha Consulting
Management AG (“ACMag”). The agreements are both effective July 2, 2018 and can be terminated upon ninety days notice.
Mr. Kandziora is President of ACMest and acted as Observer on the Board of Directors of the Company up until August 22, 2019
in addition to also being on the Supervisory Board of the Company’s Polish subsidiary, Helix Immuno-Oncology S.A. Mrs.
Kandziora is President of ACMest and was Corporate Secretary up until August 22, 2019. On October 21, 2020 the agreements
with both ACMag and ACMest were terminated by mutual agreement of the parties.
Related party transactions are at arm’s length and recorded at the amount agreed to by the related parties.
FINANCIAL INSTRUMENTS
Fair value hierarchy
Financial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 reflects valuation based on quoted prices observed in active markets for identical assets or liabilities;
Level 2 reflects valuation techniques based on inputs that are quoted prices of similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a
valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and
Level 3 reflects valuation techniques with significant unobservable market inputs.
A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring
fair value. The financial instrument in the Company’s financial statements, measured at fair value, is cash.
Fair value
The fair value of financial instruments as at July 31, 2020 and July 31, 2019 approximates their carrying value because of the
near-term maturity of these instruments.
INTELLECTUAL PROPERTY
The Company protects its intellectual property rights through a robust combination of patent, copyright, trade-mark and trade
secrets as well as with confidentiality and invention assignment agreements.
41
The Company seeks intellectual property protection in various jurisdictions around the world and owns patents and patent
applications relating to products and technologies in the United States, Canada, Europe and other jurisdictions.
As of July 31, 2020, the Company had rights to 5 issued U.S. patents, which will expire between July 16, 2023 and January 22,
2036 assuming all required fees are paid, 6 pending U.S. patent applications, 64 issued foreign patents, and 42 pending foreign
patent applications. Our patents and patent applications cover aspects of our current and future product concepts. Some of the
pending foreign patent applications preserve an opportunity to pursue patent rights in multiple countries.
As of July 31, 2020, the Company had one registered trademark in Canada.
We also rely, in part, upon unpatented trade secrets, know-how and continuing technological innovation, and may in the future
rely upon licensing opportunities, to develop and maintain our competitive position. We protect our proprietary rights through a
variety of methods, including confidentiality and assignment agreements with suppliers, employees, consultants, and others who
may have access to our proprietary information.
While there is no active litigation involving any of our patents or other intellectual property rights and we have not received any
notices of patent infringement, we may be required to enforce or defend our intellectual property rights against third parties in the
future.
Patents and other proprietary rights are very valuable to the Company and involve complex legal and factual issues. The Company
has no assurance that all of its patent applications will result in the issuance of patents. Even issued patents may not provide the
Company with a competitive advantage against competitors with similar technologies, or who have designed around the
Company’s patents. Furthermore, the Company’s patents may be invalidated or found enforceable if challenged. Intellectual
property laws vary from country to country which may result in varying levels of intellectual property protection.
Because of the substantial length of time and expense associated with developing new products, the pharmaceutical, medical
device, and biotechnology industries place considerable importance on obtaining patent protection for new technologies, products,
and processes. The Company’s policy is to file patent applications to protect inventions, technology, and improvements that are
important to the development of our business and with respect to the application of our products and technologies to the treatment
of a number of diseases. The Company’s policy also includes regular reviews related to the development of each technology and
product in light of its intellectual property protection, with the goal of protecting all key research and developments by patent.
The Company will continue to seek intellectual property protection as appropriate and require our employees, consultants, outside
scientific collaborators, and sponsored researchers to enter into confidentiality agreements with the Company that contain
assignment of invention clauses outlining ownership of any intellectual property developed during the course of the individual’s
relationship with the Company.
Patents
The Company currently owns several patents in respect of the DOS47 technology and has licensed patent rights from the NRC
for the antibody component of L-DOS47. In addition to issued patents, the Company has filed several new patent applications
around the world.
Cell-Based Therapy
The Company has recently filed a joint patent application with NRC to protect the use of an antibody for use in cell-based therapies.
In addition, the Company filed a new patent application covering the use of anti-VEGFR2 antibodies in cell-based therapy in July
2017.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no material off-balance sheet arrangements.
SUBSEQUENT EVENT
On September 3, 2020, HIO closed a direct private placement resulting in a dilution of the Company’s holding in HIO from 42.51%
at July 31, 2020 down to 29.89%.
On October 21, 2020 the agreements with both ACMag and ACMest were terminated by mutual agreement of the parties.
42
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The Company’s fiscal year commitments are summarized as follows:
2021
2022
2023
2024
2025
Clinical research organizations (1) $ 2,203,000 $ 1,406,000 $ 106,000 $
Collaborative research organization(2) 1,496,000
Contract manufacturing organizations (3) 196,000
Royalty and in-licensing (4)
20,000
146,000
Financial & investor relations (5)
Facility leases (6)
41,000
–
–
20,000
–
–
20,000
–
–
–
–
– $
–
–
20,000
–
–
– $
–
–
10,000
–
–
2026 and
beyond
Total
– $ 3,715,000
1,496,000
–
196,000
–
150,000
60,000
146,000
–
41,000
–
$ 4,102,000 $ 1,426,000 $ 126,000 $ 20,000 $ 10,000
$ 60,000 $ 5,744,000
(1) The Company has clinical research organization supplier agreements in place for clinical research services and passthrough
costs related to the Company’s clinical stage programs.
(2) The Company has collaborative research organization agreements relating to its L-DOS47 program.
(3) The Company has contract manufacturing organization supplier agreements related to its L-DOS47 program, all of which are
inter-dependant with the manufacturing of L-DOS47.
(4) Represents future minimum royalties.
(5) The Company amended a financial advisory agreement dated July 2, 2018 which includes a termination clause which requires
a ninety-day written notice. On October 21, 2020 the agreements with both ACM Alpha Consulting Management EST and
ACM Alpha Consulting Management AG were terminated by mutual agreement of the parties. (also see RELATED PARTY
TRANSACTIONS section above).
(6) The Company is committed to pay $41,000 under three facility lease agreements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s main objectives when managing capital are to ensure sufficient liquidity to finance research and development
activities, clinical trials, ongoing administrative costs, working capital and capital expenditures. The Company includes cash and
components of shareholders’ equity, in the definition of capital. The Company endeavours not to unnecessarily dilute shareholders
when managing the liquidity of its capital structure.
Currency risk
The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the U.S. dollar
and Euro. Foreign exchange risks arise from the foreign currency translation of the Company’s integrated foreign operation in
Poland. In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and liabilities
denominated in foreign currencies.
Balances in foreign currencies at:
Cash
Accounts receivable
Accounts payable
Accruals
Net foreign currencies
2020
USD
EUR
–
–
(622,000)
(44,000)
–
–
(257,000)
–
2019
USD
EUR
–
–
(563,000)
–
–
–
(401,000)
(25,000)
(666,000)
(257,000)
(563,000)
(426,000)
Closing exchange rate
Impact of 1% change in exchange rate
1.3404
+/- 9
1.5831
+/- 4
1.3148
+/-7
1.4627
+/- 6
Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Company’s results from
operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses.
Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation.
43
The table below breaks down the various categories that make up the Company’s accounts receivable balances as at July 31:
Government related – HST/VAT
Research and development investment tax credits
Other
Interest rate risk
$
2020
46,000
121,000
13,000
$ 180,000
$
2019
82,000
121,000
87,000
$ 290,000
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which
are affected by market conditions. The Company is exposed to interest rate risk arising from fluctuations in interest rates received
on its cash. The Company does not have any credit facilities and is therefore not subject to any debt related interest rate risk.
The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the
liquidity necessary to conduct its operations on a day-to-day basis. Any investment of excess funds is limited to risk-free financial
instruments. Fluctuations in the market rates of interest do not have a significant impact on the Company’s results of operations
due to the relatively short-term maturity of any investments held by the Company at any given point in time and the low global
interest rate environment. The Company does not use derivative instruments to reduce its exposure to interest rate risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due.
Since inception, the Company has mainly relied on financing its operations from public and private sales of equity. The Company
does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants.
The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flow from operations and anticipated
investing and financing activities.
The Company’s cash reserves of $4,235,000 as at July 31, 2020 are insufficient to meet anticipated cash needs for working capital
and capital expenditures through the next twelve months, nor are they sufficient to see the current research and development
initiatives through to completion. To the extent that the Company does not believe it has sufficient liquidity to meet its current
obligations, management considers securing additional funds primarily through equity arrangements to be of utmost importance.
The Company’s long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success
of the Company’s ongoing research and development programs, as well as economic conditions relating to the state of the capital
markets generally. Accessing the capital markets is particularly challenging for companies that operate in the biotechnology
industry.
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at:
July 31, 2020
July 31, 2019
Accounts payable
Accrued liabilities
Carrying
amount
Less than Greater than
one-year
one year
–
$
$ 1,416,000 $ 1,416,000
–
301,000
301,000
Carrying
amount
Less than Greater than
one-year
one year
–
$
$ 3,040,000 $ 3,040,000
–
1,057,000
1,057,000
This table only covers liabilities and obligations relative to financial instruments and does not anticipate any income associated
with assets nor does it include liabilities related to assets held for sale.
OUTSTANDING SHARE DATA
As at July 31, 2020, the Company had outstanding 132,933,017 common shares; warrants to purchase up to 65,080,413 common
shares; and incentive stock options to purchase up to 5,225,000 common shares. As at July 31, 2019, the Company had
outstanding 111,225,501 commons shares; warrants to purchase up to 43,372,897 common shares; and incentive stock options
to purchase up to 4,875,000 common shares.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Management has designed the Company’s disclosure controls and procedures to provide reasonable assurance that all relevant
information is gathered, recorded, processed, summarized and reported to the Chief Executive Officer (“CEO”) and the Chief
Financial Officer (“CFO”) of the Company so that appropriate decisions can be made within the time periods specified in securities
legislation regarding public disclosure by the Company in its annual filings, interim filings or other documents or reports required
to be filed or submitted by it under securities legislation.
44
Management has also designed internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the
reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS. Because of its inherent limitations, ICFR can provide only reasonable assurance and may not prevent or detect
misstatements. Further, 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 the degree of compliance with policies or procedures may
deteriorate.
Material weakness previously disclosed but not yet remediated
The termination of the Company’s controller in fiscal 2017, whose position to this day has not been filled, resulted in a lack of
resources and has in turn impacted segregation of duties associated with the financial close and reporting process.
As at July 31, 2020, management has evaluated the effectiveness of the Company’s disclosure controls and procedures and ICFR
and have concluded they are not effective due to the above noted area of concern.
Management has concluded and the board has agreed, that when taking into account the Company’s size and financial resources,
the Company does not have sufficient scale of resources to warrant the hiring of additional staff to address this concern at this
time and, accordingly, that there is a material weakness in the design of the Company’s ICFR that has the potential to result in
material misstatements in the Company’s financial statements and that this should also be considered a weakness in the design
and operating effectiveness of the Company’s disclosure controls and procedures. This material weakness is considered to be a
common area of deficiency for many smaller listed companies in Canada.
Although the CEO and CFO are not aware of the above deficiency having actually resulted in a material misstatement of a financial
statement amount or disclosure, they have determined that, the deficiency could result in business and accounting practices that
could put both the Company’s reputation and its financial reporting at risk and lead to uncertainty whether control procedures are
being carried out such that the Company’s ICFR may fail to prevent or detect a material misstatement of a financial statement
amount or disclosure on a timely basis or fail to disclose material information required to be disclosed under securities legislation
within the time periods specified in securities legislation. However, there are several mitigating procedures and other factors which
reduce the risk of a material misstatement in the financial statements, including substantive review of the financial statements by
the Company’s audit committee and day-to-day management involvement in operations and reporting.
RISKS AND UNCERTAINTIES
Helix is subject to risks, events and uncertainties, or “risk factors”, associated with being a publicly traded company operating in
the biotechnology industry, with research and development stage projects in pre-clinical discovery and clinical development and
with no expectation of revenue or profits in the foreseeable future and, as such, is heavily dependant on raising sufficient capital
on a timely bases in order to advance the Company’s drug development programs. As a result of these risk factors, reported
information and forward-looking information may not necessarily be indicative of future operating results or of future financial
position, and actual results may vary from the forward-looking information or reported information. The Company cannot predict
all of the risk factors, nor can it assess the impact, if any, of such risk factors on the Company’s business or the extent to which
any factor, or combination of factors, may cause future results or financial position to differ materially from either those reported
or those projected in any forward-looking information. Accordingly, reported financial information and forward-looking information
should not be relied upon as a prediction of future actual results. Some of the risks and uncertainties affecting the Company, its
business, operations and results which could cause actual results to differ materially from those reported or from forward-looking
information include, either wholly or in part, those described elsewhere in this MD&A, as well as the following:
The Company does not have any source of operating income and is dependent solely on outside sources of financing
The Company’s operations consist of research and development activities, which do not generate any revenue.
Accordingly, the Company has no source of revenue, positive operating cash flow or operating earnings to subsidize its
ongoing research and development and other operating activities and the ability of the Company to continue as a going
concern is dependent upon the Company’s ability to rely on cash on hand, and on outside sources of financing to fund
its ongoing research and development and other operating activities. Such sources of financing involve risks, including
that the Company will not be able to raise such financing on terms satisfactory to the Company or at all, and that any
additional equity and/or any convertible debt financing, if secured, would result in dilution to existing shareholders, and
that such dilution may be significant. While the Company has been able to raise equity financing in recent years, there
can be no assurance that additional funding by way of equity financing will continue to be available. Any additional equity
and/or debt financing, if secured, would result in dilution to the existing shareholders and such dilution may be significant.
The Company may also seek additional funding from or through other sources, including technology licensing, co-
development collaborations, mergers and acquisitions, joint ventures, and other strategic alliances, which, if obtained,
may reduce the Company’s interest in its projects or products or result in significant dilution to existing shareholders.
The Company may also seek additional funding from government grants. There can be no assurance, however, that any
alternative sources of funding will be available. The failure of the Company to obtain additional financing on a timely
basis may result in the Company reducing, delaying or cancelling one or more of its planned research and development
programs, including clinical trials, further reducing overhead, or monetizing non-core assets, any of which could impair
45
the current and future value of the business or cause the Company to consider ceasing operations and undergoing
liquidation. Given the Company’s conclusion about the insufficiency of its cash reserves, significant doubt may be cast
about the Company’s ability to continue operating as a going concern. The continuation of the Company as a going
concern for the foreseeable future depends mainly on raising sufficient capital, and in the interim, reducing, where
possible, operating expenses (including making changes to the Company’s research and development plans), including
the delay of one or more of the Company’s research and development programs, further reducing overhead and the
possible disposition of assets.
The Company has a history of losses and expects to continue to incur additional losses for the foreseeable future
The Company’s primary focus continues to be on its research and development of drug product candidates. The research
and development of drug product candidates require the expenditure of significant amounts of cash over a relatively long-
time period. The Company expects to continue to incur losses from continuing operations, for the foreseeable future.
The Company’s cumulative deficit as at July 31, 2020 is $180,516,000. There can be no assurance that the Company
will record earnings in the future.
The Company requires additional funding
The Company’s cash reserves will not be sufficient for the Company to fully fund the Company’s ongoing research and
development programs, operating activities, working capital or capital expenditures for the next twelve months. The
Company has no sources of external liquidity, such as a bank loan or line of credit. The Company is therefore in need
of additional equity and/or debt financings in order to fund its ongoing research and development programs and other
operating expenses for the foreseeable future.
The failure of the Company to obtain additional financing on a timely basis may result in the Company reducing, delaying
or cancelling one or more of its planned research and development, including any clinical trials, further reducing
overhead, or monetizing non-core assets, any of which could impair the current and future value of the business or cause
the Company to consider ceasing operations and undergoing liquidation.
The Company faces risks in connection with competition and technological change;
The biotechnology industry is subject to rapid and substantial technological change. Technological competition from
pharmaceutical companies, biotechnology companies and university researchers is intense and is expected to continue
to be intense.
The rapid advancement of immunotherapies has and likely will continue to significantly change the treatment of cancer
and may result in a reduction, which may be significant, in the potential patient population and/or treatment protocols
available to chemotherapies and other treatments currently in development, such as the Company’s primary drug product
candidate, L-DOS47. Developments in immunotherapies have resulted in the Company repositioning its L-DOS47 lead
drug product candidate away from a front-line monotherapy protocol towards second and third-line combination therapies
with existing chemotherapy drugs and possibly in combination with immunotherapies resulting in additional expenditures
and delays in previously anticipated development timelines for L-DOS47. Advancements in technology can impact the
Company at any time and as such, any further repositioning, would likely result in additional expenses being incurred by
the Company and in further delays in the anticipated development timeline for L-DOS47, or in the Company determining
that its L-DOS47 drug product candidate is no longer viable. The Company is currently heavily dependent on the success
of its lead drug product candidate L-DOS47 which is the only drug candidate currently in clinical development.
The Company cell-based therapies initiative may face significant hurdles. The Company’s effort is mainly at research
proof-of-concept stage. It is possible that the selected targets or choice of antibodies are not optimal. This can delay the
initiation of formal preclinical and clinical development significantly. The Company has chosen to develop cell-based
therapy for solid tumour. While there are many successful examples of cell-based therapy treatment in hematological
malignancies, similar success in solid tumour is less certain.
Many of the Company’s competitors have substantially greater financial, technical and human resources and significantly
greater experience in conducting preclinical testing and human clinical trials of product candidates, scaling up
manufacturing operations and obtaining regulatory approvals of products. Accordingly, the Company’s varying competitors
may succeed in obtaining regulatory approval for products more rapidly. The Company’s ability to compete successfully
will largely depend on:
the efficacy and safety profile of our product candidates relative to marketed products and other product
candidates in development;
our ability to develop and maintain a competitive position in the product categories and technologies on which
we focus;
the time it takes for our product candidates to complete clinical development and receive marketing approval;
our ability to obtain required regulatory approvals;
46
our ability to commercialize any of our product candidates that receive regulatory approval;
our ability to establish, maintain and protect intellectual property rights related to our product candidates; and
acceptance of any of our product candidates that receive regulatory approval by physicians and other healthcare
providers and payers.
Competitors have developed and may develop technologies that could be the basis for products that challenge the
differentiated nature and potential for best-in-class product development programs and discovery research capabilities of
the DOS47 platform technology. Some of those products may have an entirely different approach or means of
accomplishing the desired therapeutic effect than our product candidates and may be more effective or less costly than
our product candidates. The success of our competitors and their products and technologies relative to our technological
capabilities and competitiveness could have a material adverse effect on the future preclinical studies a nd clinical trials
of our product candidates, including our ability to obtain the necessary regulatory approvals for the conduct of such clinical
trials. This may further negatively impact our ability to generate future product development programs with improved
pharmacological properties.
With the recent FDA approval of pembrolizumab (Keytruda®) as first line treatment for NSCLC with PD-L1>1%, either
as first line or in combination with carboplatin/pemetrexed, there is an urgent need for data to demonstrate the safety of
L-DOS47 in combination with accepted standard chemotherapies, and also in combination with immunotherapies that
are being offered with growing frequency. In addition, the rapidly evolving treatment landscape and growing prominence
of immunotherapies, along with the infrequent use of vinorebine/cisplatin chemotherapy combination in the U.S., the
potential relevance of data from the Company’s LDOS003 study may be limited.
If we are not able to compete effectively against our current and future competitors, our business will not grow and our
financial condition and operations will substantially suffer.
The Company is conducting early stage research and development initiatives for products under development which
may not be accepted by the market and may never generate revenue and the Company has limited sales, marketing and
distribution experience
The Company is conducting early stage research and development initiatives and is currently in the process of developing
new products that require further time consuming and costly research and development. It will be a number of years, if
ever, before its products in development begin to generate revenues, if at all. There can be no assurance that any of the
drug product candidates will ever be successfully developed or commercialized.
Even with regulatory approval, the Company may not achieve market acceptance, which depends on a number of factors,
including the establishment and demonstration in the medical community of the clinical utility of the Company’s products,
and their potential advantage over alternative treatment methods. There is also the risk that the actual market size or
opportunity for the Company’s drug candidates is not certain. Failure to gain market acceptance of either of the
Company’s products currently under development or an incorrect estimate in the nature and size of their respective
markets could have a material adverse effect on the Company.
The Company has limited sales, marketing and distribution experience, and there is no assurance that the Company will
be able to establish adequate sales, marketing, and distribution capabilities or make arrangements with any collaborators,
strategic partners, licensees, or others to perform such activities, or that such efforts will be successful. The Company’s
objective for its drug candidate products is to enter into strategic alliances with appropriate pharmaceutical partners.
There can be no assurance that any such strategic alliance will be maintained or achieved, or if achieved, that it will result
in revenue to the Company.
The timing of the Company’s internal goals and projected timelines may not be met
The Company sets internal goals for and makes public statements regarding its expected timing of meeting the objectives
material to its success, including the commencement, duration and completion of clinical trials and anticipated regulatory
approvals. The actual timing of these forward-looking events can vary dramatically due to a number of factors, including,
without limitation, delays in scaling-up of drug product candidates, delays or failures in clinical trials, additional data
requirements from the regulators, the Company failing to obtain required financing, and other risks referred to herein.
Without limiting the generality of the foregoing, it is possible that required regulatory approvals may be delayed or denied,
including those related to undertaking or continuing clinical trials, manufacturing of drug products, and marketing such
products.
The Company has expressed certain estimated timelines for its European Phase I//II clinical trials for L-DOS47 in Poland,
the U.S. Phase I study. The timeline for the European Phase I/II trials and any future timelines are contingent on the
Company having adequate financing to complete the trials and the assumption that the trials will be completed according
to the current schedules. A failure to obtain necessary financing or a change in the schedule of the trials (which may
occur if certain cost-deferral measures are taken, or due to factors beyond the Company’s reasonable control, such as
scheduling conflicts, the occurrence of serious adverse events, interruption of supplies of study drugs, withdrawals of
47
regulatory approvals, or slow patient recruitment) could delay their commencement or completion, or result in their
suspension or early termination, which could have a material adverse effect on the Company.
The Company faces intellectual property risks, including the loss of patent protection, the potential termination of
licences, the inability to protect proprietary property, and possible claims of infringement against the Company or against
a third-party from whom the Company licenses intellectual property
The Company’s success depends, in part, on its ability to secure and protect its intellectual property rights and to operate
without infringing on the proprietary rights of others or having third parties circumvent the rights owned or licensed by the
Company. However, the Company cannot predict the enforceability of its patents or its ability to maintain trade secrets
that may not be protected by patents. Patent risks include the fact that patent applications may not result in issued
patents, issued patents may be circumvented, challenged, invalidated or insufficiently broad to protect the Company’s
products and technologies; blocking patents by third parties could prevent the Company from using its patented
technology; it may be difficult to enforce patent rights, particularly in countries that do not have adequate legal enforcement
mechanisms, and enforcing such rights may divert management attention and may cause the Company to incur significant
expenses; and any expiry of an issued patent may negatively impact the underlying technology.
To protect its trade secrets, the Company enters into confidentiality undertakings with parties that have access to them,
such as the Company’s current and prospective distributors, collaborators, employees and consultants, but a party may
breach the undertakings and disclose the Company’s confidential information or competitors might learn of the information
in some other way, which could have a material adverse effect on the Company.
The Company uses processes, technology, products, or information, the rights to certain of which are owned by others,
such as a license from the NRC of the lung antibody used by the Company for L-DOS47. Termination or expiry of any
licenses or rights during critical periods, and an inability to obtain them on commercially favourable terms or at all could
have a material adverse effect on the Company and its drug candidates’ development.
The Company operates in an industry that experiences substantial litigation involving the manufacture, use and sale of
new products that are the subject of conflicting proprietary rights. The Company or one or more of its licensors may be
subject to a claim of infringement of proprietary rights by a third party. It is possible that the Company’s products and
technologies do infringe the rights of third parties, and the Company or such licensor could incur significant expenses,
and diversion of management attention, in defending allegations of infringement of proprietary rights, even if there is no
infringement. Furthermore, the Company or such licensors may be required to modify its products or obtain licenses for
intellectual property rights as a result of any alleged proprietary infringement. The inability to modify products or obtain
licenses on commercially reasonable terms, in a timely manner or at all, could adversely affect the Company’s business.
The Company faces research and development risks, including the need to prove the Company’s drug candidates are
safe and effective in clinical trials
The Company’s drug candidates are complex compounds and the Company faces difficult challenges in connection with
the manufacture of clinical batches of each of them, which could further delay or otherwise negatively affect the
Company’s planned clinical trials, or required regulatory approvals.
There is also the risk that the Company could obtain negative findings or factors that may become apparent during the
course of research or development. The results from preclinical and clinical trials may not be predictive of results obtained
in any ongoing or future clinical trials. A number of companies in the biotechnology and pharmaceutical industry have
suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials and pre-
clinical trials.
The timing and success of the Company’s clinical trials also depend on a number of other factors, including, but not
limited to: (a) obtaining additional financing, which is not assured; (b) sufficient patient enrolment, which may be affected
by the incidence of the disease studied, the size of the patient population, the nature of the protocol, the proximity of
patients to clinical sites, the eligibility criteria for a patient to participate in the study and the rate of patient drop-out; (c)
regulatory agency policies regarding requirements for approval of a drug, including granting permission to undertake
proposed human testing; (d) the Company’s capacity to produce sufficient quantities and qualities of clinical trial materials
to meet the trial schedule; (e) performance by third parties, on whom the Company relies to carry out its clinical trials;
and (f) the approval of protocols and/or protocol amendments.
Clinical trials are complex, expensive and uncertain, and have a high risk of failure, which can occur at any stage. Data
obtained from pre-clinical and clinical trials may be interpreted in different ways, or be incorrectly reported, which could
delay or prevent further development of the drug candidate studied. Failure to complete clinical trials successfully and
to obtain successful results on a timely basis could have a material adverse effect on the Company.
Even if the Company’s drug candidates successfully complete the clinical trials and receive the regulatory approval
necessary to market the drug candidates to the public, there is also the risk of unknown side effects, which may not
48
appear until the drug candidates are on the market and may result in delay or denial of regulatory approval or withdrawal
of previous approvals, product recalls or other adverse events, which could materially adversely affect the Company.
While the Company continues to explore opportunities to expand its drug product pipeline with new DOS47-based
therapeutics pending the identification of further tumour targeting agents, there can be no assurance that any such
tumour targeting agents will be identified or that any new DOS47-based therapeutics will be developed.
Difficulty in enrolling patients in the Company’s clinical trials, could result in delays or cancellation of clinical trials
As the Company’s product candidates advance from preclinical testing to clinical testing, and then through progressively
larger and more complex clinical trials, the Company will need to enroll an increasing number of patients that meet various
eligibility criteria. There is significant competition for recruiting cancer patients in clinical trials, and the Company may be
unable to enroll the patients it needs to complete clinical trials on a timely basis or at all. The factors that affect the
Company’s ability to enroll patients is largely uncontrollable and include, but are not limited to, the following:
size and nature of the patient population;
eligibility and exclusion criteria for the trial;
design of the study protocol;
competition with other companies for clinical sites or patients;
the perceived risks and benefits of the product candidate under study;
the patient referral practices of physicians; and
the number, availability, location and accessibility of clinical trial sites.
The Company is dependent on a number of third parties and the failure or delay in the performance of one of these third
parties’ obligations may adversely affect the Company
The Company is dependent on third parties to varying degrees in virtually all aspects of its business, including without
limitation, on contract research organizations, contract manufacturing organizations, clinical trial consultants, raw material
suppliers, collaborative research consultants, regulatory affairs advisers, medical and scientific advisors, clinical trial
investigators, business service providers and other third parties. Critical supplies may not be available from third parties
on acceptable terms, or at all, including GMP grade materials. Service providers may not perform, or continue to perform,
as needed, or be available to provide the required services on acceptable terms or at all. Any lack of or interruption in
supplies of raw materials or services, or any change in supply or service providers or any inability to secure new supply
or service providers, would have an adverse impact on the development and commercialization of the Company’s
products. For example, the Company has previously experienced delays in the manufacturing of both engineering and
clinical batches of L-DOS47, which have in turn caused delays in the progression of its development program, and there
may be further delays. The Company relies on a third party for its supply of urease and if the contract with the third-party
urease supplier is terminated early, the Company will have to find a new supplier of urease, as well as a new manufacturer
of bulk drug product for future clinical testing programs. There can be no assurance that a new supplier or manufacturer
can be contracted in a timely manner or at all, and this could negatively impact the Company’s development plans for L-
DOS47.
With respect to L-DOS47, the Company is currently dependent on, in addition to third party suppliers, manufacturers and
consultants, the NRC and its license to the Company of a lung cancer antibody in order to develop and commercialize
L-DOS47. Early termination of the license with NRC would have a material adverse effect on the further development of
L-DOS47 and may require the cessation of such development, which would have a material adverse effect on the
Company.
Given the Company`s lack of financing, expertise, infrastructure and other resources to support a new drug product from
clinical development to marketing, the Company also requires strategic partner support to develop and commercialize its
drug candidates. There can be no assurance that such strategic partner support will be obtained upon acceptable terms
or at all.
The Company relies heavily on contract manufacturers for the production of product required for its clinical trials, product
formulation work, scaling-up experiments and commercial production. The Company may not be able to obtain new, or
keep its current, contract manufacturers to provide these services. Even if the Company does, contract manufacturers
may not be reliable in meeting its requirements for cost, quality, quantity or schedule, or the requirements of any
regulatory agencies. The Company may not be able to manufacture products in quantities or qualities that would enable
the Company to meet its business objectives, and failure to do so would materially adversely affect the Company’s
business.
If the Company can successfully develop markets for its products, the Company would have to arrange for their scaled-
up manufacture. There can be no assurance that the Company will, on a timely basis, be able to make the transition
from manufacturing clinical trial quantities to commercial production quantities successfully or be able to arrange for
scaled-up commercial contract manufacturing. Any potential difficulties experienced by the Company in manufacturing
49
scale-up, including recalls or safety alerts, could have a material adverse effect on the Company’s business, financial
condition, and results of operations.
The marketability of the Company’s products may be affected by delays and the inability to obtain necessary approvals,
and following any market approval, the Company’s products will be subject to ongoing regulatory review and
requirements which may continue to affect their marketability, including but not limited to regulatory review of drug
pricing, healthcare reforms or the payment and reimbursement policies for drugs by the various insurers and other
payors in the industry
The research, development, manufacture and marketing of pharmaceutical products are subject to regulation by the
FDA, and comparable regulatory authorities in other countries. These agencies and others regulate the testing,
manufacture, safety and promotion of the Company’s products. The Company must receive applicable regulatory
approval of a product candidate before it can be commercialized in any particular jurisdiction. Approval by a regulatory
authority of one country does not ensure the approval by regulatory authorities of other countries. Changes in regulatory
approval policies or regulations during the development period may cause delays in the approval or rejection of an
application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any
application, or may decide that our data are insufficient for approval, or require additional preclinical, clinical or other trials
and place the Company’s IND submissions on hold for an indeterminate amount of time. The development and regulatory
approval process in each jurisdiction takes many years, requires the expenditure of substantial resources, is uncertain
and subject to delays, and can adversely affect the successful development and commercialization of our drug
candidates.
Even if the Company obtains marketing approval in a particular jurisdiction, there may be limits on the approval and the
Company’s products likely will be subject to ongoing regulatory review and regulatory requirements in that jurisdiction.
Pharmaceutical companies are subject to various government regulations, including without limitation, requirements
regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may
be subject to other present and future regulations.
The availability of reimbursement by governmental and other third-party payors, such as private insurance plans, will
affect the market for any pharmaceutical product, and such payors tend to continually attempt to contain or reduce the
costs of healthcare. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare
products.
The Company operates in an industry that is more susceptible than others to legal proceedings and, in particular, liability
claims
The Company operates in an industry that is more susceptible to legal proceedings than firms in other industries, due to
the uncertainty involved in the development of pharmaceuticals. Defense and prosecution of legal claims can be
expensive and time consuming and may adversely affect the Company regardless of the outcome due to the diversion
of financial, management and other resources away from the Company’s primary operations. Negative judgments
against the Company, even if the Company is planning to appeal such a decision, or even a settlement in a case, could
negatively affect the cash reserves of the Company, and could have a material negative effect on the development of its
drug products.
The Company may be exposed, in particular, to liability claims which are uninsured or not sufficiently insured, and any
claims may adversely affect the Company’s ability to obtain insurance in the future or result in negative publicity regarding
the efficacy of its drug products. Such liability insurance is expensive, its ability is limited, and it may not be available on
terms that are acceptable to the Company, if at all.
The use of any of the Company’s unapproved products under development, the use of its products in clinical trials, and,
if regulatory approval is received, the sale of such products, may expose the Company to liability claims which could
materially adversely affect the Company’s business. The Company may not be able to maintain or obtain commercially
reasonable liability insurance for future products, and any claims under any insurance policies may adversely affect its
ability to maintain existing policies or to obtain new insurance on existing or future products. Even with adequate
insurance coverage, publicity associated with any such claim could adversely affect public opinion regarding the safety
or efficacy of the Company’s products. As a result, any product liability claims or recall, including in connection with
products previously sold by the Company through its former distribution business, could materially adversely affect the
Company’s business.
If the Company were unable to maintain product liability insurance required by our third parties, the corresponding
agreements would be subject to termination, which could have a material adverse impact on our operations.
Some of our licensing and other agreements with third parties require or might require us to maintain product liability
insurance. If the Company cannot maintain acceptable amounts of coverage on commercially reasonable terms in
50
accordance with the terms set forth in these agreements, the corresponding agreements would be subject to termination,
which could have a material adverse impact on the Company’s operations.
The Company is dependent upon key personnel; Director residency requirements
The Company’s ability to continue its development of potential products depends on its ability to attract and maintain
qualified key individuals to serve in management and on the Board. However, the Company does not currently have a
formal succession plan for members of its senior management team or for its Board and, because competition for qualified
key individuals with experience relevant to the industry in which the Company operates is intense, the Company may not
be able to attract and/or retain such personnel. Additionally, applicable corporate law requires that at least 25% of the
Company’s directors be resident Canadians, and the Company’s articles provide that the Company cannot have fewer
than five directors at any time.
Consequently, if the Company is unable to attract and/or loses and is unable to replace key personnel, its business could
be negatively affected and, in particular, if the Company loses one or more of its three current resident Canadian directors
in the future and is unable to find a sufficient number of resident Canadian directors to fill the resulting vacancy(ies), the
Board will be prevented from taking any action other than appointing additional resident Canadian directors until such
time as a sufficient number of new resident Canadian directors have been appointed such that at least 25% of the
Company’s directors are resident Canadians.
The Company employs a small number of employees who have many years of technical knowledge of the Company’s
technology and two senior officers, the CEO and CFO. The Novel Coronavirus (“COVID-19”) imposes a high risk to all
the Companies activities. The Company has established a policy to diligently monitor developments. Because the
situation is fluid, the Company will be updating its staff whenever necessary. The Company has implemented and
communicated a policy to all staff in order mitigate any potential risk.
In addition, the Company does not carry key-man insurance on any individuals.
The Company’s employees and consultants may engage in misconduct or other improper activities, including non-
compliance with regulatory standards and requirements, which could have a material adverse effect on the Company’s
business.
The Company is exposed to the risk of employee and consultant fraud or other misconduct. Misconduct by employees
and consultants could include, but are not limited to the following: failure to comply with regulators, failure to provide
accurate information, failure to comply with manufacturing standards the Company has established, jurisdictional
healthcare fraud and abuse of laws and regulations, failure to report financial information or data accurately or disclose
unauthorized activities. For example, sales, marketing and business arrangements in the healthcare industry are subject
to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These
laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales
commission, customer incentive programs and other business arrangements. Employee and consultant misconduct could
also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions and serious harm to the Company’s reputation. If any such actions are instituted against the Company, and the
Company is not successful in defending itself or asserting its rights, those actions could have a substantial impact on the
Company’s business and operating results, including the imposition of substantial fines, halt in trading of the Company’s
common shares, possible delisting and/or other sanctions.
Indemnification obligations to directors and officers of the Company may adversely affect the Company’s finances
The Company has entered into agreements pursuant to which the Company has agreed to indemnify its directors and
senior management in respect of certain claims made against them while acting in their capacity as such. If the Company
is called upon to perform its indemnity obligations, its finances may be adversely affected.
The Company’s finances may fluctuate based on foreign currency exchange rates
The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the
U.S. dollar, the Euro and the Polish Zloty.
Unanticipated changes in the Company’s tax rates could affect its future results
Since the Company operates in different countries and is subject to taxation in different jurisdictions, its future effective
tax rates could be impacted by changes in such countries’ tax laws or their interpretations. Both domestic and
international tax laws are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of
regulation and court rulings. The application of these tax laws and related regulations is subject to legal and factual
interpretation, judgment and uncertainty.
51
Shareholders of the Company may face dilution through exercise of stock options, warrants and future equity financings
To attract and retain key personnel, the Company has granted options to its key employees, directors and consultants to
purchase common shares and share awards as non-cash incentives. In addition, the Company has a significant number
of warrants to purchase common shares outstanding. The issuance of shares pursuant to share awards and the exercise
of a significant number of such options and warrants may result in significant dilution of other shareholders of the
Company.
As noted above, the Company needs additional funding and has historically turned to the equity markets to raise this
funding. The future sale of equity and warrants may also result in significant dilution to the shareholders of the Company.
The Company’s share price and trading volumes are volatile, and the Company may have difficulty maintaining listing
requirements
The price of the Company’s common shares, as well as market prices for securities of biopharmaceutical and drug
delivery companies generally, have historically been highly volatile, and have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of particular companies.
The trading price of the Company’s common shares is subject to change and could in the future fluctuate significantly.
The fluctuations could be in response to numerous factors beyond the Company’s control, including: quarterly variations
in results of operations; announcements of technological innovations or new products by the Company, its customers or
competitors; changes in securities analysts’ recommendations; announcements of acquisitions; changes in earnings
estimates made by independent analysts; general fluctuations in the stock market; or revenue and results of operations
below the expectations of public market securities analysts or investors. Any of these could result in a sharp decline in
the market price of the common shares.
The Internet offers various avenues for the dissemination of information. The Company has no control over the
information that is distributed and discussed on electronic bulletin boards and investment chat rooms. The intention of
the people or organizations that distribute such information may not be in the Company’s best interest and the best
interests of its shareholders. This, in addition to other forms of investment information including newsletters and research
publications, could result in a sharp decline in the market price of the common shares.
In addition, stock markets have occasionally experienced extreme price and volume fluctuations. The market prices for
high-technology companies have been particularly affected by these market fluctuations and such effects have often
been unrelated to the operating performance of such companies. These broad market fluctuations may cause a decline
in the market price of the common shares.
Sales of substantial numbers of the Company’s common shares could cause a decline in the market price of such
common shares. There are minimum listing requirements for an issuer to maintain its listing on the Toronto Stock
Exchange (“TSX”), and if the Company fails to maintain these listing requirements, it may be involuntarily delisted from
the TSX. De-listing the Company or the Company shares from any securities exchange could have a negative effect on
the liquidity of the Company shares and/or the ability of a shareholder to trade in shares of the Company, and could have
an adverse effect on the Company’s ability to raise future equity financings. The Company’s common shares trade in a
very low volume compared to the number of common shares outstanding. This means a shareholder could have difficulty
disposing of common shares, especially if there are other shareholders of the Company trying to sell their shares in the
Company at the same time. Volatility in share price and trading volumes could have an adverse effect on the Company’s
ability to raise future equity financings.
The requirements of being a public company may strain the Company’s resources, divert management’s attention and
affect its ability to attract and retain qualified board members
As a public company, the Company is subject to the reporting requirements of Canadian securities regulators, the listing
requirements of the Exchange and other applicable securities rules and regulations. Compliance with these rules and
regulations may increase the Company’s legal and financial compliance costs, may make some activities more difficult,
time-consuming or costly and may increase the demand on the Company’s systems and resources. Being a public
company requires that the Company file continuous disclosure documents, including, among other things, annual and
quarterly financial statements. Management’s attention may be diverted from other business concerns, which could have
a material adverse effect on the Company’s business, financial condition and results of operations. The Company may
need to hire more employees in the future, which will increase its costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure create
uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time
consuming. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. The Company may invest resources to comply with evolving
52
laws, regulations and standards, and this investment may result in increased general and administrative expenses and
a diversion of management’s time and attention from revenue-generating activities to compliance activities. If the
Company’s efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
authorities, legal proceedings may be initiated against the Company and its business may be harmed.
Trading in the Company’s common shares outside of Canada may be subject to restrictions on trading under foreign
securities laws, and purchasers of securities under private placements by the Company will be subject to certain
restrictions on trading
The Company’s common shares trade on the TSX and are freely tradeable only in Canada. As such, shareholders
trading the Company’s common shares outside of Canada may be subject to restrictions imposed by foreign securities
laws that may restrict their ability to transfer shares freely or at all. Certain securities offered by the Company pursuant
to its private placements, including the unlisted warrants issued by the Company, are subject to certain initial hold periods
and other restrictions on trading imposed by applicable securities laws and, in the case of the warrants, pursuant to the
terms of the applicable warrant certificates. These restrictions may affect the liquidity of the investment of certain
shareholders in the securities of the Company.
General economic conditions may have an adverse effect on the Company and its business
Continuing global economic volatility and uncertainty may have an adverse effect on the Company and its business,
including without limitation the ability to raise additional financing, to obtain strategic partner support or commercialization
opportunities and alliances for the Company’s new drug candidates, and to obtain continued services and supplies.
The Company’s business involves environmental risks that could result in accidental contamination, injury, and
significant capital expenditures in order to comply with environmental laws and regulations
The Company and its commercial collaborators are subject to laws and regulations governing the use, manufacture,
storage, handling and disposal of materials and certain waste products. Although the Company believes that its safety
procedures comply with the regulations, the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. The Company is not specifically insured with respect to this liability.
The Company (or its collaborators) may be required to incur significant costs to comply with environmental laws and
regulations in the future; and the operations, business or assets of the Company may be materially adversely affected
by current or future environmental laws or regulations.
Any failure to maintain an effective system of internal controls may result in material misstatements of our consolidated
financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud; and in that case, our
shareholders could lose confidence in our financial reporting, which would harm our business, could negatively impact
the price of our common shares and prevent the Company from raising additional capital.
Effective internal controls are necessary for the Company to provide reliable financial reports and prevent fraud. If the
Company fails to maintain an effective system of internal controls, the Company may not be able to report its financial
results accurately or prevent fraud; and in that case, the Company’s shareholders could lose confidence in our financial
reporting, which would harm our business, negatively impact the price of the Company’s common shares and also prevent
the Company from raising additional capital. Even if we were to conclude that our internal control over financial reporting
provides reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS as issued by the IASB, because of its inherent limitations,
internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to achieve and maintain
effective internal control over financial reporting could prevent the Company from complying with its reporting obligations
on a timely basis, which could result in the loss of investor confidence in the reliability of the Company’s consolidated
financial statements, harm our business, negatively impact the trading price of our common shares and prevent the
Company from raising additional capital.
Novel Coronavirus (“COVID-19”)
The World Health Organization has declared COVID-19 a pandemic. The Company is actively assessing and responding
where possible to the potential impact of the COVID-19 pandemic. The risk to the Company, the health of its employees
and to those third-party vendors that support the Company and its operations is high. Any impact on the Company arising
from the pandemic could have a material adverse effect on the Company’s business, results of operations and financial
condition.
53
RISK FACTORS IN OTHER PUBLIC FILINGS
For all of the reasons set forth above, together with those additional risk factors identified under the headings “Forward-Looking
Statements” and “Risk Factors” in the Company’s most recent Annual Information Form filed under the Company’s profile on
SEDAR at www.sedar.com, investors should not place undue reliance on forward-looking information. Other than any obligation
to disclose material information under applicable securities laws, the Company undertakes no obligation to revise or update any
forward-looking information after the date hereof.
Data relevant to estimated market sizes and penetration for the Company’s lead products under development are presented in
this MD&A. This data has been obtained from a variety of published resources including published scientific literature, websites
and information generally available through publicized means. The Company attempts to source reference data from multiple
sources whenever possible for confirmatory purposes. Although the Company believes the foregoing data is reliable, the
Company has not independently verified the accuracy and completeness of this data.
ADDITIONAL INFORMATION
Additional information relating to the Company’s fiscal year ended July 31, 2020, is available under the Company’s profile on
SEDAR at www.sedar.com.
October 29, 2020
________
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Corporate Information
DIRECTORS AND OFFICERS
TRANSFER AGENT
Computershare
100 University Avenue
8th Floor, North Tower Toronto
Ontario, Canada, M5J 2Y1
Tel: (800) 564-6253
EXCHANGE SYMBOLS
TSX: HBP
Slawomir Majewski, M.D.
Chairman
Artur Gabor
Director
Ireneusz Fafara
Director
Heman Chao, Ph.D.
Director
Chief Executive & Scientific Officer
Frank Michalargias, CPA, CA
Chief Financial Officer
SCIENTIFIC ADVISORY BOARD
Robert J. Gillies, Ph.D
Kazimierz Roszkowski-Sliz, M.D., Ph.D.
Heman Chao, Ph.D.
9120 Leslie Street, Suite 205
Richmond Hill, Ontario, Canada, L4B 3J9
+1 (905) 841-2300
ir@helixbiopharma.com