UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of May, 2020 Commission File Number: 001-36596 ___________________ TRILLIUM THERAPEUTICS INC. (Translation of registrant's name into English) 2488 Dunwin Drive Mississauga, Ontario L5L 1J9 Canada (Address of principal executive offices) ___________________ Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [ ] Form 40-F [X] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)[ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)[ ]
Transcript
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington,D.C.20549
___________________
FORM 6-KREPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Forthemonth ofMay, 2020
CommissionFileNumber: 001-36596
___________________
TRILLIUM THERAPEUTICS INC. (Translation of registrant's name into English)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,thereuntodulyauthorized.
Trillium Therapeutics Inc. Date:May15,2020 By:/s/ James Parsons Name:JamesParsons Title:ChiefFinancialOfficer
TRILLIUM THERAPEUTICS INC. Interim Condensed Consolidated Statements of Financial Position AmountsinthousandsofUSdollars(Unaudited)
As at Asat Note March 31, 2020 December31,2019 $ $ ASSETS Current Cashandcashequivalents 123,021 14,584Marketablesecurities 12,036 8,082Amountsreceivable 448 327Prepaidexpenses 2,483 299 Total current assets 137,988 23,292 Propertyandequipment 1,916 2,115 Total non-current assets 1,916 2,115 Total assets 139,904 25,407 LIABILITIES Current Accountspayableandaccruedliabilities 21,831 12,754Othercurrentliabilities 934 773 Total current liabilities 22,765 13,527 Warrantliability 4 32,299 11,223Otherliabilities 723 825 Total non-current liabilities 33,022 12,048 Total liabilities 55,787 25,575 EQUITY Commonshares 5 307,253 150,943SeriesIpreferredshares 5 - 2,348SeriesIIpreferredshares 5 23,159 22,316Contributedsurplus 22,201 22,652Deficit (261,068) (190,999)Accumulatedothercomprehensiveloss (7,428) (7,428) Total equity (deficiency) 84,117 (168) Total liabilities and equity (deficiency) 139,904 25,407 Commitmentsandcontingencies[note 8]
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. Interim Condensed Consolidated Statements of Loss and Comprehensive Loss AmountsinthousandsofUSdollars,exceptpershareamounts(Unaudited)
Three months ended Threemonthsended Note March 31, 2020 March31,2019 $ $ EXPENSES Researchanddevelopment 6 4,369 7,588Generalandadministrative 7 10,796 631 Operatingexpenses 15,165 8,219 Financeincome (416) (170)Financecosts 48 38Netforeigncurrencyloss 25 419Revaluationofwarrantliability,net 4 55,224 (479) Netfinancecosts(income) 54,881 (192) Loss before income taxes 70,046 8,027 Currentincometaxexpense 23 2 Net loss and comprehensive loss for the period 70,069 8,029 Basic and diluted loss per common share 5(b) 1.07 0.46
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. Interim Condensed Consolidated Statements of Changes in Equity AmountsinthousandsofUSdollars(Unaudited)
Total transactions with ownersof the Company 11,600,000 15,077 - - 7,150,000 (6,566) 575 - (54) 9,032 Impact of change inpresentation currency - - - - - - - 589 - 589 Balance, March 31, 2019 26,288,831 144,590 17,171,541 2,348 11,518,403 28,669 21,618 (7,636) (157,406) 32,183
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. Interim Condensed Consolidated Statements of Cash Flows AmountsinthousandsofUSdollars(Unaudited)
Three months ended Threemonthsended Note March 31, 2020 March31,2019 $ $ OPERATING ACTIVITIES Netlossfortheperiod (70,069) (8,029)Adjustmentsforitemsnotaffectingcash Interestaccretion 45 32Share-basedcompensation 5 330 575Amortizationofwarrantdiscount 4 89 41Changeinfairvalueofwarrantliability 4 55,135 (973)Amortizationofintangibleassets 6 - 440Depreciationofpropertyandequipment 6 199 171Unrealizedforeignexchangeloss 192 408 (14,079) (7,335)Changesinnon-cashworkingcapitalbalances Amountsreceivable (121) 406Prepaidexpenses (2,184) 9Accountspayableandaccruedliabilities 9,077 (1,335)Othercurrentliabilities 153 (5) Cash used in operating activities (7,154) (8,260) INVESTING ACTIVITIES Netmaturities(purchases)ofmarketablesecurities (3,954) 9,192Purchaseofpropertyandequipment - (144) Cash provided by (used in) investing activities (3,954) 9,048 FINANCING ACTIVITIES Repaymentofleaseliabilities (139) (46)Repaymentofloanpayable - (22)Exerciseofstockoptions 5 1,079 -Exerciseofwarrants 4,5 9,057 -Issuanceofwarrants,netofissuancecosts - 5,761Issuanceofsharecapital,netofissuancecosts 5 109,740 8,411 Cash provided by financing activities 119,737 14,104 Impactofforeignexchangerateoncashandcashequivalents (192) (203) Net increase in cash and cash equivalents during the period 108,437 14,689 Cashandcashequivalents,beginningofperiod 14,584 15,318 Cash and cash equivalents, end of period 123,021 30,007
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
1. Corporate information
TrilliumTherapeuticsInc.(the"Company"or"Trillium")isaclinical-stageimmuno-oncologycompanydevelopinginnovativetherapiesforthetreatmentofcancer. The Company is a corporation existing under the laws of the Province of British Columbia. The Company's head office is located at 2488 DunwinDrive,Mississauga,Ontario,L5L1J9,anditislistedontheTorontoStockExchangeandontheNasdaqStockMarket.
2. Basis of presentation
(a)Statement of compliance
These unaudited interim condensed consolidated financial statements have been prepared in compliance with International Accounting Standard 34 InterimFinancial Reporting. The notes presented in these unaudited interim condensed consolidated financial statements include only significant events andtransactions occurring since the Company's last fiscal year-end and are not fully inclusive of all matters required to be disclosed in its annual auditedconsolidatedfinancialstatements.
ThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationof accounting policies and the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.Actual results coulddiffer materially fromtheseestimates andassumptions. TheCompanyreviewsits estimates andunderlyingassumptions onanongoingbasis.Revisionsarerecognizedintheperiodinwhichtheestimatesarerevisedandmayimpactfutureperiods.
TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
2. Basis of presentation (continued)
COVID-19
Given the ongoing and dynamic nature of the circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the impact ofCOVID-19, including any responses to it, will be on the global economy and the business of the Company or for how long any disruptions are likely tocontinue.Theextentofsuchimpactwilldependonfuturedevelopments,whicharehighlyuncertain,rapidlyevolvinganddifficulttopredict,includingnewinformationwhichmayemergeaboutCOVID-19andadditionalactionswhichmaybetakentocontainit.SuchdevelopmentscouldhaveamaterialadverseeffectontheCompany'sbusiness,financialcondition,resultsofoperationsandcashflow,andexposuretocreditrisk.
TheCompany'ssignificantaccountingpolicieswereoutlinedintheCompany'sannualauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2019,andhavebeenappliedconsistentlytoallperiodspresentedintheseunauditedinterimcondensedconsolidatedfinancialstatements.Intheopinionofmanagement, all adjustments considered necessary for fair presentation have been included in these unaudited interim condensed consolidated financialstatements.TheseunauditedinterimcondensedconsolidatedfinancialstatementsshouldbereadinconjunctionwiththeannualauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2019.
(a)Basis of consolidation
These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, TrilliumTherapeuticsUSAInc.,fromitsdateofincorporationonMarch26,2015.
TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
The risk-free interest rate used to calculate the fair values of warrants in the current period is based on the implied yield on USGovernment bonds with aremainingtermequaltotheexpectedtermofthewarrants.Therisk-freeinterestrateusedinthecomparativeperiodofDecember31,2019wasbasedontheimpliedyieldonaGovernmentofCanadazero-couponissuewitharemainingtermequaltotheexpectedtermofthewarrants.TheexpectedvolatilityisbasedonthehistoricalvolatilityfortheCompany.
5. Share capital
(a) Share capital issued - three months ended March 31, 2020
During the three months ended March 31, 2020, 7,684,717 common shares were issued on the exercise of 7,684,717 common share purchase warrants forproceedsof$7,377,and1,750,000SeriesIIFirstPreferredShareswereissuedontheexerciseof1,750,000SeriesIIFirstPreferredSharepurchasewarrantsforproceedsof$1,680.
The weighted average number of common shares outstanding for the three months ended March 31, 2020 and 2019 were 65,522,274 and 17,480,498,respectively.TheinclusionoftheCompany'sstockoptions,warrantsandpreferredsharesinthecomputationofdilutedlosspersharehasananti-dilutiveeffectonthelosspershareandhasthereforebeenexcludedfromthecalculationofdilutedlosspershare.
TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
OnMay6,2020theboardofdirectorsapprovedthe2020OmnibusEquityIncentivePlan,("OmnibusPlan"),whichremainssubjecttoshareholderapproval.The Omnibus Plan will govern the terms of the Company's stock option and DSU grants, and provides for equity settlement of DSUs issued for directorcompensation.
In conjunction with the approval of the Omnibus Plan, each director holding DSUs under the Cash-Settled DSU Plan entered into an agreement with theCompany to have their existing DSUs be governed by the Omnibus Plan, subject to shareholder approval of the Omnibus Plan at the Annual General andSpecialMeetingtobeheldonJune30,2020.
TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
TheCompanyentersintoresearch,developmentandlicenseagreementsintheordinarycourseofbusinesswheretheCompanyreceivesresearchservicesandrights to proprietary technologies. Milestone and royalty payments that may become due under various agreements are dependent on, among other factors,clinicaltrials,regulatoryapprovalsandultimatelythesuccessfuldevelopmentofanewdrug,theoutcomeandtimingofwhichareuncertain.
The Company periodically enters into research and license agreements with third parties that include indemnification provisions customary in the industry.TheseguaranteesgenerallyrequiretheCompanytocompensatetheotherpartyforcertaindamagesandcostsincurredasaresultofclaimsarisingfromresearchanddevelopmentactivitiesundertakenbyoronbehalfoftheCompany.Insomecases,themaximumpotentialamountoffuturepaymentsthatcouldberequiredundertheseindemnificationprovisionscouldbeunlimited. Theseindemnificationprovisionsgenerallysurviveterminationoftheunderlyingagreement. ThenatureoftheindemnificationobligationspreventstheCompanyfrommakingareasonableestimateofthemaximumpotentialamountitcouldberequiredtopay. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the consolidatedfinancialstatementswithrespecttotheseindemnificationobligations.
9. Financial instruments
Fair value
IFRS13Fair Value Measurementprovidesahierarchyof valuationtechniquesbasedonwhether theinputs tothosevaluationtechniquesareobservableorunobservable. Observable inputs are those that reflect market data obtained from independent sources, while unobservable inputs reflect the Company'sassumptionswithrespecttohowmarketparticipantswouldpriceanassetorliability.Thesetwoinputsusedtomeasurefairvaluefallintothefollowingthreedifferentlevelsofthefairvaluehierarchy:
Level1 Quotedpricesinactivemarketsforidenticalinstrumentsthatareobservable.Level 2 Quoted prices in active markets for similar instruments; inputs other than quoted prices that are observable and derived from or
TheCompanyhasexposuretocreditrisk,liquidityrisk,interestrateriskandcurrencyrisk.TheCompany'sboardofdirectorshasoverallresponsibilityfortheestablishment andoversight of theCompany's riskmanagement framework. TheAudit Committeeof theboardof directors is responsible for reviewingtheCompany'sriskmanagementpolicies.
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TRILLIUM THERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended March 31, 2020 and 2019 AmountsinthousandsofUSdollars,exceptpershareamountsandwherenoted(Unaudited)
9. Financial instruments (continued)
(a) Credit risk
CreditriskistheriskoffinanciallosstotheCompanyifacounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromthe Company's cash and cash equivalents, marketable securities and amounts receivable. The carrying amount of these financial assets represents themaximumcreditexposure.TheCompanyfollowsaninvestmentpolicytomitigateagainstthedeteriorationofprincipalandtoenhancetheCompany'sabilitytomeetitsliquidityneeds.CashisondepositwithmajorCanadiancharteredbanksandtheCompanyinvestsinhigh-gradeshort-terminstruments.
ThefollowingMD&AispreparedasofMay6,2020forTrilliumTherapeuticsInc.forthethreemonthsendedMarch31,2020and2019,andshouldbereadinconjunctionwiththeunauditedinterimcondensedconsolidatedfinancialstatementsforthethreemonthsendedMarch31,2020and2019,andtheannualauditedconsolidated financial statements and accompanying notes for the years ended December 31, 2019 and 2018, which have been prepared by management inaccordancewithInternationalFinancialReportingStandards,orIFRSasissuedbytheInternationalAccountingStandardsBoard,orIASB.OurIFRSaccountingpoliciesaresetoutinnote3oftheannualauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2019and2018.AllamountsareinthousandsofUSdollars,exceptpershareamountsandunlessotherwiseindicated.Referencesto"CDN$"aretoCanadiandollars.
OnJanuary1,2020,ourfunctionalcurrencywaschangedtoUSdollarsfromCanadiandollars.ThechangewasmadetoreflectthatUSdollarshasbecomethecurrencyoftheprimaryeconomicenvironmentinwhichweoperate,countingforasignificantpartofourlabor,clinicaloperations,andfinancing.Thechangehasbeen implemented with prospective effect. Comparative financial information previously expressed in Canadian dollars is now presented in US dollars for allperiodsshown.
Inthelast quarter of 2019, wechangedourpresentationcurrencytoUSdollars fromCanadiandollars. Comparativefinancial informationfor thethreemonthsendedMarch31,2019previouslyexpressedinCanadiandollarsisnowpresentedinUnitedStatesdollars.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
ThisMD&Acontainsforward-lookingstatementswithinthemeaningofapplicablesecuritieslaws.Allstatementscontainedhereinthatarenotclearlyhistoricalinnature are forward-looking, and the words "anticipate", "believe", "expect", "estimate", "may", "will", "could", "leading", "intend", "contemplate", "shall" andsimilar expressions are generally intended to identify forward-looking statements. Forward-looking statements in this MD&A include, but are not limited to,statementswithrespectto:
Byitsnature,forward-lookinginformationinvolvesnumerousassumptions,inherentrisksanduncertainties,bothgeneralandspecific,knownandunknown,thatcontributetothepossibilitythatthepredictions,forecasts,projectionsorotherforward-lookingstatementswillnotoccur.Inevaluatingforward-lookingstatements,readers should specifically consider various factors, including the risks outlined under the heading "Risk Factors" in this MD&A. Some of these risks andassumptionsinclude,amongothers:
Althoughtheforward-lookingstatementscontainedinthisMD&Aarebaseduponwhatourmanagementbelievestobereasonableassumptions,wecannotassurereadersthatactualresultswillbeconsistentwiththeseforward-lookingstatements.Theforward-lookingstatementsinthisMD&AdonotincludeafullassessmentorreflectionoftheunprecedentedimpactsoftheCOVD-19pandemicoccurringinthefirst quarterof2020andtheongoinganddevelopingindirectglobalandregional impacts. It is anticipated that the spread of COVID-19 and the global measures to contain it, will have an impact on the Company, however, it ischallengingtoquantifythepotentialmagnitudeofsuchimpactatthistime.
We are a clinical stage immuno-oncology company developing innovative therapies for the treatment of cancer. Our most advanced program, TTI-621, is aSIRPαFcfusionproteinthatconsistsoftheextracellularCD47-bindingdomainofhumansignalregulatoryproteinalpha,orSIRPα,linkedtotheFcregionofahuman immunoglobulin G1, or IgG1. It is designed to act as a soluble decoy receptor, preventing CD47 from delivering its inhibitory ("do not eat") signal.NeutralizationoftheinhibitoryCD47signalenablestheactivationofmacrophageanti-tumoreffectsbypro-phagocytic("eat")signals.TheIgG1FcregionofTTI-621mayalsoassistintheactivationofmacrophagesbyengagingFcreceptors.TTI-621hasshownsingleagentactivitybybothlocaland/orsystemicdeliveryinmultipleB-andT-celllymphomaindicationsandhasbeenwelltoleratedinover200patientstodate.
Rapidly advance the clinical development of TTI-621 and TTI-622.Wearecurrentlyintheprocessofidentifyingthemaximumtoleratedorrecommendedphase2dosesforbothTTI-621andTTI-622,andplantorapidlyadvancebothmoleculesintophase1b/2studies.
Focus our TTI-621 and TTI-622 clinical programs on promising cancer indications. BecauseCD47ishighlyexpressedbymultipleliquidandsolidtumors,andhighexpressioniscorrelatedwithworseclinicaloutcomes,webelieveourSIRPαFcfusionproteinshavethepotentialtobeeffectiveinavarietyofcancers.WehavealreadyidentifiedseveralcancerswherewesawpositiveresponsestoTTI-621inpatients,includingB-andT-celllymphomas.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Focus our TTI-621 and TTI-622 clinical programs on promising combinations.WhilewebelievethatamonotherapypathforTTI-621incertainindicationsshowspromise,wearealsoplanningtoevaluateTTI-621andTTI-622incombinationwithotheranti-cancerdrugs,includingimmunomodulatoryagents.
Our Pipeline
SIRPαFc
Blocking the CD47 "do not eat" signal using a SIRPαFc decoy receptor
Theimmunesystemis thebody's mechanismtoidentify andeliminate pathogens, andcanbedividedintotheinnate immunesystemandtheadaptiveimmunesystem.Theinnateimmunesystemisthebody'sfirstlineofdefensetoidentifyandeliminatepathogensandconsistsofproteinsandcells,suchasmacrophages,that identify and provide an immediate response to pathogens. The adaptive immune systemis activated by, and adapts to, pathogens, creating a targeted anddurableresponse.Cancercellsoftenhavetheabilitytoreducetheimmunesystem'sabilitytorecognizeanddestroythem.
Macrophages are a type of white bloodcell that can ingest anddestroy (phagocytose) other cells. Macrophage activity is controlled byboth positive "eat" andnegative"donoteat"signals.Recently,aroleformacrophagesinthecontroloftumorshasbeendescribed.Tumorcellsmayexpress"eat"signals(e.g.calreticulin)thatmakethemselvesvisibletomacrophages.TocounterbalancethisincreasedvisibilitythetumorcellsoftenexpresshighlevelsofCD47,whichtransmitsa"donoteat"signalbybindingSIRPαonthesurfaceofmacrophages.ElevatedexpressionofCD47hasbeenobservedacrossarangeofhematologicalandsolidtumors.Inmanycases,highCD47expressionwasshowntohavenegativeclinicalconsequences,correlatingwithmoreaggressivediseaseandpoorsurvival.
Ourmostadvancedprogram,TTI-621,isanovelSIRPαFcfusionproteinthatharnessestheinnateimmunesystembyblockingtheactivityofCD47.TTI-621isaproteinthatconsistsoftheCD47-bindingdomainofhumanSIRPαlinkedtotheFcregionofIgG1.Itisdesignedtoactasasolubledecoyreceptor,preventingCD47 from delivering its inhibitory signal. Neutralization of the inhibitory CD47 signal enables the activation of macrophage anti-tumor effects by the pro-phagocytic"eat"signals.TheIgG1FcregionofTTI-621mayalsoassistintheactivationofmacrophagesbyengagingFcreceptors.OursecondSIRPαFcfusionproteinTTI-622consistsofthesameCD47-bindingdomainofhumanSIRPαandislinkedtotheFcregionofIgG4.TheIgG4FcregionofTTI-622isexpectedtohavea decreased ability to engageactivating Fcreceptors comparedto anIgG1Fc, andthus providea more modest "eat" signal to macrophages, allowingforgreatertolerabilityandhigherCD47blockadebutlowerpotency.TTI-622willallowustoassesshowhigherCD47blockadewithanIgG4-basedagentinpatientscomparestolowerCD47blockadewithanIgG1-baseddrug(TTI-621).
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Inadditiontotheirdirectanti-tumoractivity,macrophagescanalsofunctionasantigen-presentingcellsandstimulateantigen-specificT-cells.Thus,itispossiblethatincreasingtumorcellphagocytosisafterSIRPαFcexposuremayresultinenhancedadaptiveimmunity.Insupportofthis,CD47antibodyblockadehasbeenrecently shown to augment antigen presentation and prime an anti-tumor cytotoxic T-cell response in immune-competent mice. In 2016, we presented datademonstrating that TTI-621 can augment antigen-specific T-cell responses in vitro. CD47 blockade has also been reported to promote tumor-specific T-cellresponsesthroughadendriticcell-basedmechanism,althoughtheeffectofSIRPαFcondendriticcellsiscurrentlyunknown.
The figure below illustrates how SIRPαFc blocks the CD47 "do not eat" signal and engages activating Fc receptors on macrophages, leading to tumor cellphagocytosisandpossiblyincreasedantigenpresentationandenhancedT-cellresponses.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Combination Therapy
WebelievethatSIRPαFcenhancementofmacrophageactivity,andpossiblyT-cellresponses,couldbesynergisticwithotherimmune-mediatedtherapies.Sincemanycancerantibodiesworkatleastinpartbyactivatingcellsoftheinnateimmunesystem,itmaybepossibletoenhancethepotencyoftheseagentsbyblockingthe negative "do not eat" CD47 signal that tumor cells deliver to macrophages. In fact, we have observed anti-tumor activity when combining SIRPαFc withrituximab in both preclinical studies and in B-cell lymphomapatients. Wehypothesize that SIRPαFcmayact synergistically with other immunological agents,includingT-cellcheckpointinhibitors(e.g.pembrolizumabandnivolumab),cancervaccines,oncolyticvirusesorchimericantigenreceptor,orCART-cells.
SIRPαFc Clinical Development - TTI-621
Aphase1multicenter,open-labelstudyinwhichpatientswithadvancedrelapsedorrefractoryhematologicmalignanciesreceiveintravenousTTI-621iscurrentlyin progress (NCT02663518). The study consists of four parts: (a) completed "Parts 1-3" in hematologic malignancies, with dosing up to 0.5 mg/kg, conductedunder initial dose-limiting toxicity, or DLT, criteria; and (b) ongoing "Part 4" in cutaneous T-cell lymphoma (CTCL), utilizing revised DLT criteria forthrombocytopenia(asdetailedbelow)andanamendedprotocoltoallowfordosingabove0.5mg/kg.
Part 4 of the study is now ongoing under an amended protocol. Given the transient nature of thrombocytopenia observed in Parts 1-3 of the study, the DLTdefinitionforthrombocytopeniawasrevised,fromGrade4ofanydurationinParts1-3,toGrade4lasting72+hoursoraplateletcountlessthan10,000/microliterat anytimein Part 4. NoDLTshave beenobservedat the 0.5 and0.7 mg/kgdose levels; furthermore noGrade4 thrombocytopenia of anyduration has beenobserved.Thestudyisnowdosingatthe1.4mg/kglevel,andtheprotocolallowsforhigherdosingifappropriate.
We have also conducted an open-label phase 1 trial in which TTI-621 was delivered by intratumoral injection in patients with relapsed and refractory,percutaneously-accessiblecancers. Asreportedat theAmericanSocietyofHematology60thAnnual MeetinginDecember2018,local deliveryofTTI-621waswelltolerated,andreductionsinCompositeAssessmentofIndexLesionSeverity,orCAILS,scores,whichmeasurelocallesionresponses,wereobservedin91%ofevaluablemycosisfungoidespatients,with41%exhibitingreductionsof50%orgreater.Theseresponsesoccurredrapidlywithinthe2-weekinductionperiod.Collectively, these data provide clinical proof-of-concept for TTI-621. As announced in October 2019, the intratumoral study has been closed and weare nowfocusedonintravenousdeliveryofTTI-621.
Atwo-part,multicenter,open-label,phase1a/1bstudyofTTI-622inpatientswithadvancedrelapsedorrefractorylymphomaormultiplemyelomaiscurrentlyinprogress (NCT03530683). In the phase 1a dose-escalation part, patients are being enrolled in sequential dose cohorts to receive TTI-622 once weekly tocharacterizesafety,tolerability,pharmacokinetics,andtodeterminethemaximumtolerateddose.Inthephase1bpart,patientswithhematologicmalignancieswillbetreatedwithTTI-622incombinationwithotheragents.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Tolerability and safety.TTI-621hasbeenwelltoleratedinover200patientstodate.TTI-622hasbeenwelltoleratedwithnodose-limitingtoxicitiesobservedinthe19patientsdosedtodate.
Demonstrated clear signals of activity.TTI-621monotherapyhasproducedpositivesignalsofclinicalactivityinCTCL,PTCLandDLBCLpatients.AsignalofactivitywasalsoseeninDLBCLpatientswhencombinedwithrituximab.
SIRPαFc Competition
There are a number of companies developing blocking agents to the CD47-SIRPα axis, including CD47-specific antibodies, SIRPα-specific antibodies, CD47bispecificantibodies,amutatedhighaffinitySIRPαFc,aSIRPαFc-agonistfusionproteinandsmallmoleculeinhibitors.Themostadvancedcompetitormoleculeismagrolimab(developedbyFortySeven,Inc.,recentlyacquiredbyGileadSciencesInc.),aCD47-specificantibodycurrentlyinphase2development.
Furthermore,webelievethatbothTTI-621andTTI-622aredifferentiatedfromotherCD47blockingagentsbyminimalbindingtohumanredbloodcells.Thisproperty confers several possible advantages, including avoidance of drug-induced anemia, avoidance of the "antigen sink effect" (i.e. removal of drug fromcirculationbyRBCs)andnon-interferencewithlaboratorybloodtypingtests.
General Business Developments during the three months ended March 31, 2020
InMarch2020,theWorldHealthOrganizationdeclaredCOVID-19aglobalpandemic.Thiscontagiousdiseaseoutbreak,whichhascontinuedtospread,andanyrelated adverse public health developments, have adversely affected workforces, economies, and financial markets globally, potentially leading to an economicdownturn.Atthistime,itisnotpossibleforustopredictthedurationormagnitudeoftheadverseresultsoftheoutbreakanditseffectsonourbusinessorresultsofoperations.
On January 16, 2020, we announced that we regained compliance with the Nasdaq minimumbid price requirement. According to the letter received fromtheNasdaq Listing Qualifications Department, the closing bid price of our common shares had been at $1.00 per common share or greater for a minimumof 10consecutivedays,andwehadregainedcompliancewiththeminimumbidpricerequirementsetforthinRule5550(a)(2)forcontinuedlistingontheNasdaq.
Governance Changes during the three months ended March 31, 2020
To our knowledge, there have not been any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings, thoseinvolvinganythirdparty,andgovernmentalproceedingspendingorknowntobecontemplated,whichmayhave,orhavehadintherecentpast,significanteffectonourfinancialpositionorprofitability.
2020.(2) Researchanddevelopment expenditures in the abovetable includeall direct andindirect costs for the programs, personnel costs, intellectual property,
amortization, share-based compensation and research and development overhead, and is net of government assistance. Research and developmentoverheadcostshavebeenallocatedtotheprogramsbasedmainlyonpersonneltimespentontheprograms.
Most of our resources were focused on the development of our SIRPαFc program, including clinical development, research, manufacturing and regulatoryactivities, andfor workingcapital andgeneral corporate purposes. Forthethree monthsendedMarch31, 2020, SIRPαFcresearchanddevelopment costs werelowerthantheprioryearduemainlytolowerclinicaltrialexpenses,manufacturingcosts,share-basedcompensationexpense,andsalaries.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
TheresearchanddevelopmentprogramexpensesforthethreemonthsendedMarch31,2020of$2,897werelowerthantheprioryearperiodof$4,800duemainlytolowerclinicaltrialexpensesandmanufacturingcosts.Salaries,feesandshort-termbenefitswerelowerforthethreemonthsendedMarch31,2020comparedtothe same period in the prior year due mainly to a lower employee headcount, subsequent to a restructuring event that occurred in October 2019. Share-basedcompensation costs were lower compared to the sameperiod last year duemainly to the lower weighted average fair value of stockoptions outstandingin thecurrentperiod.Amortizationofintangibleassetswas$nilcomparedtotheprioryearperiod,asimpairmentoflegacyFluorinovintangibleassetsrecognizedinthethirdquarterof2019resultedinanetbookvalueof$nil.
During the three months ended March 31, 2020, we recorded a net foreign currency loss of $25, compared to a net foreign currency loss of $419 for thecomparativeperiodin2019.ThenetforeigncurrencylossinthecurrentperiodreflectedaweakeningoftheCanadiandollarversustheUSdollarwhileholdingnetCanadiandollardenominatedassets.
Wehaveexperiencedoperatinglossesandcashoutflowsfromoperationssinceincorporation,willrequireongoingfinancinginordertocontinueourresearchanddevelopmentactivitiesandwehavenotearnedsignificantrevenueorreachedsuccessfulcommercializationofourproducts.Ourfutureoperationsaredependentupon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of ourproducts.Therecanbenoassurancethatwewillbesuccessfulincontinuingtofinanceouroperations.
In January 2020, we completed an underwritten public offering of 41,279,090 common shares and 1,250,000 Series II Non-Voting Convertible First PreferredShares,eachissuedat$2.75pershare.Thenumberofsharessoldinclude5,547,272commonsharespursuanttothefullexercisebytheunderwritersoftheiroptiontopurchaseadditionalcommonshares.Thegrossproceedsfromthisofferingwere$116,955,beforedeductingofferingexpensesof$7,215.Theproceedsfromthisfinancingwillbeusedtowards:(i)theclinicaldevelopmentofourCD47programs;and(ii)research,manufacturingandregulatoryactivities,andworkingcapitalandgeneralcorporatepurposes.
We enter into research, development and license agreements in the ordinary course of business where we receive research services and rights to proprietarytechnologies. Milestone androyalty payments that maybecomedueunder various agreements are dependent on, amongother factors, clinical trials, regulatoryapprovalsandultimatelythesuccessfuldevelopmentofanewdrug,theoutcomeandtimingofwhichisuncertain.
Under the license agreement for SIRPαFc, wehave future contingent milestones payable of $19related to successful patent grants, $154and$231onthe firstpatientdosedinphase2and3clinicaltrialsrespectively,andregulatorymilestonesontheirfirstachievementtotaling$3,846,andlowsingledigitroyaltiespayableonnetsales.
Weperiodicallyenterintoresearchandlicenseagreementswiththirdpartiesthatincludeindemnificationprovisionscustomaryintheindustry.Theseguaranteesgenerallyrequireustocompensatetheotherpartyforcertaindamagesandcostsincurredasaresult ofclaimsarisingfromresearchanddevelopmentactivitiesundertakenbyusoronourbehalf.Insomecases,themaximumpotentialamountoffuturepaymentsthatcouldberequiredundertheseindemnificationprovisionscould be unlimited. These indemnification provisions generally survive termination of the underlying agreement. The nature of the indemnification obligationspreventsusfrommakingareasonableestimateofthemaximumpotentialamountwecouldberequiredtopay.Historically,wehavenotmadeanyindemnificationpaymentsundersuchagreementsandnoamounthasbeenaccruedinourconsolidatedfinancialstatementswithrespecttotheseindemnificationobligations.
Share capital issued - three months ended March 31, 2020
In January 2020, we completed an underwritten public offering of 41,279,090 common shares and 1,250,000 Series II Non-Voting Convertible First PreferredShares,eachissuedat$2.75pershare.Thenumberofsharessoldinclude5,547,272commonsharespursuanttothefullexercisebytheunderwritersoftheiroptiontopurchaseadditionalcommonshares.Thegrossproceedsfromthisofferingwere$116,955,beforedeductingofferingexpensesof$7,215.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Share capital issued - year ended December 31, 2019
InFebruary2019,wecompletedanunderwrittenpublicofferingof6,550,000commonshareunitsand12,200,000SeriesIINon-VotingConvertibleFirstPreferredShareunits,eachissuedat$0.80perunit.Thegrossproceedsfromthisofferingwere$15,000,beforedeductingofferingexpensesof$1,117.EachcommonshareunitiscomprisedofonecommonshareoftheCompanyandonecommonsharepurchasewarrant.Eachcommonsharepurchasewarrantwillbeexercisableforonecommonshareat a priceof$0.96percommonsharepurchasewarrant forsixtymonths. Eachpreferredshareunit is comprisedofoneSeriesII First PreferredShareoftheCompanyandoneSeriesIIFirstPreferredSharepurchasewarrant.EachSeriesIIFirstPreferredSharepurchasewarrantwillbeexercisableforoneSeriesIIFirstPreferredShareatapriceof$0.96perSeriesIIFirstPreferredSharepurchasewarrantforsixtymonths.Eachpurchasewarranthasapriceprotectionfeaturethatresetstheexercisepriceofthewarrantundercertainconditionsincludingtheissuanceofcommonshares,orsecuritiesconvertibleintocommonshares,atpricesbelowtheexerciseprice.
We also have an Inducement Stock Option Plan, or 2019 Inducement Plan. The 2019 Inducement Plan is used exclusively for the grant of equity awards toindividualswhowerenotpreviouslyanemployeeornon-employeedirectorofTrillium(orfollowingabonafideperiodofnon-employment) asaninducementmaterialtosuchindividual'senteringintoemploymentwithTrilliuminaccordancewithNasdaqListingRule5635(c)(4).Stockoptionsthataregrantedareequity-settled,haveamaximumtermoftenyearsandmaybesubjecttovestingprovisionsasdeterminedbyourboard.Thetotalnumberofcommonsharesavailableforissuance under the 2019 Inducement Plan is 3,000,000. As at March 31, 2020, we were entitled to issue an additional 1,200,000 stock options under the 2019InducementPlan.
Historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity andcapitalresourcesvarysubstantiallyfromperiodtoperioddependingonthenumberofresearchanddevelopmentprogramsbeingundertakenatanyonetime,thestage of the development programs, the timing of significant expenditures for manufacturing, toxicology and pharmacology studies and clinical trials, and theavailabilityoffundingfrominvestorsandprospectivecommercialpartners.
Wearean"emerginggrowthcompany"undertheUSJumpstartOurBusinessStartupsActof2012,ortheJOBSAct,andwillcontinuetoqualifyasan"emerginggrowthcompany"untiltheearliesttooccurof:(a)thelastdayofthefiscalyearduringwhichwehavetotalannualgrossrevenuesof$1.07billion(assuchamountis indexedfor inflationevery5years bytheSEC)ormore; (b) thelast dayofourfiscal year followingthefifthanniversaryofthedateof thefirst sale of ourcommonsharespursuanttoaneffectiveregistrationstatementundertheUSSecuritiesActof1933whichisDecember31,2020;(c)thedateonwhichwehave,duringtheprevious3-yearperiod,issuedmorethan$1.0billioninnon-convertibledebt;or(d)thedateonwhichwearedeemedtobea"largeacceleratedfiler",asdefinedinRule12b-2oftheUSSecuritiesExchangeActof1934,ortheExchangeAct.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Any US domestic issuer that is an emerging growth company is able to avail itself of the reduced disclosure obligations regarding executive compensation inperiodicreportsandproxystatements,andtonotpresenttoitsshareholdersanon-bindingadvisoryvoteonexecutivecompensation,obtainapprovalofanygoldenparachutepaymentsnotpreviouslyapproved,orpresenttherelationshipbetweenexecutivecompensationactuallypaidandourfinancialperformance.Solongaswe are a foreign private issuer, we are not subject to such requirements, and will not become subject to such requirements even if we were to cease to be anemerginggrowthcompany.
ThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofaccounting policies and the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. Actualresults could differ materially fromthese estimates and assumptions. We reviewour estimates and underlying assumptions on an ongoing basis. Revisions arerecognizedintheperiodinwhichtheestimatesarerevisedandmayimpactfutureperiods.
Inmanagement'sjudgment,theaccountingestimatesdetailedinnote2oftheannualauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2019and2018donotrequiremanagementtomakeassumptionsaboutmattersthatarehighlyuncertainand,accordingly,noneofthoseestimatesareconsidereda"criticalaccountingestimate"asdefinedinForm51-102F1-Management Discussion and Analysis,publishedbytheOntarioSecuritiesCommission.
The following information sets forth material risks and uncertainties that may affect our business, including our future financing and operating results and couldcause our actual results to differ materially from those contained in forward-looking statements we have made in this MD&A. The risks and uncertainties beloware not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect ourbusiness. Further, if we fail to meet the expectations of the public market in any given period, the market price of our common shares could decline. We operate ina highly competitive environment that involves significant risks and uncertainties, some of which are outside of our control.
Risks Related to Our Financial Position and Need for Additional Capital
We expect to incur future losses and we may never become profitable.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not completethe development and commercialization of our product candidates or develop new product candidates.
Asa research and development company, our operations have consumed substantial amounts of cash since inception. We expect to spend substantial funds tocontinuetheresearch,developmentandtestingofourproductcandidatesandtopreparetocommercializeproductssubjecttoapprovaloftheFDA,intheUSandsimilar approvals in other jurisdictions. We will also require significant additional funds if we expand the scope of our current clinical plans or if we were toacquire any new assets and advance their development. Therefore, for the foreseeable future, we will have to fund all of our operations and developmentexpenditures fromcashonhand, equityor debt financings, throughcollaborations withother biotechnologyorpharmaceutical companies orthroughfinancingsfromothersources.WeexpectthatourexistingcombinedcashandcashequivalentsandmarketablesecuritiesasatMarch31,2020of$135,057willenableustofundourcurrentoperatingplanrequirementsforatleastthenexttwelvemonths.Additionalfinancingwillberequiredtomeetourlongertermliquidityneeds.Ifwedonot succeedinraisingadditional fundsonacceptable terms, wemight not beabletocomplete preclinical studies andclinical trials or pursueandobtainapprovalofanyproductcandidatesfromtheFDAandotherregulatoryauthorities.Itispossiblethatfuturefinancingwillnotbeavailableor,ifavailable,maynotbeonfavorableterms.Theavailabilityoffinancingwillbeaffectedbytheachievementofourcorporategoals,theresultsofscientificandclinicalresearch,theabilitytoobtainregulatoryapprovals,thestateofthecapitalmarketsgenerallyandwithparticularreferencetodrugdevelopmentcompanies,thestatusofstrategicallianceagreementsandotherrelevantcommercialconsiderations.Ifadequatefundingisnotavailable,wemayberequiredtodelay,reduceoreliminateoneormoreof our product development programs, or obtain fundsthroughcorporate partners or others whomayrequire usto relinquishsignificant rights toproductcandidatesorobtainfundsonlessfavorabletermsthanwewouldotherwiseaccept.Totheextentthatexternalsourcesofcapitalbecomelimitedorunavailableoravailable on onerous terms, our intangible assets and our ability to continue our clinical development plans may become impaired, and our assets, liabilities,business,financialconditionandresultsofoperationsmaybemateriallyoradverselyaffected.
We currently have no product revenue and will not be able to maintain our operations and research and development without additional funding.
Todate, wehavegenerated noproduct revenueandcannot predict whenandif wewill generate product revenue. Our ability to generate product revenue andultimately become profitable depends upon our ability, alone or with partners, to successfully develop our product candidates, obtain regulatory approval, andcommercializeproducts,includinganyofourcurrentproductcandidates,orotherproductcandidatesthatwemaydevelop,in-licenseoracquireinthefuture.Wedo not anticipate generating revenue from the sale of products for the foreseeable future. We expect our research and development expenses to increase inconnectionwithourongoingactivities,particularlyasweadvanceourproductcandidatesthroughclinicaltrials.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
The duration and impact of the current COVID-19 pandemic is uncertain.
We may be subject to significant cash payouts in connection with our outstanding warrants in the event of a "Fundamental Transaction".
In the event of a "Fundamental Transaction" (as defined in the related warrant agreement, which generally includes any merger with another entity, the sale,transferorotherdispositionofallorsubstantiallyallofourassetstoanotherentity,ortheacquisitionbyapersonofmorethan50%ofourcommonstock),eachwarrantholderwillhavetherightupto90daysaftertheconsummationoftheFundamentalTransactiontorequireustorepurchasethewarrantforapurchasepriceincashequaltotheBlackScholesvalue(ascalculatedunderthewarrantagreement)ofthethenremainingunexercisedportionofsuchwarrantonthedateofsuchFundamentalTransaction,whichmaymateriallyadverselyaffectourfinancialconditionand/orresultsofoperations.TherecanbenoassurancethatintheeventofaFundamentalTransactionwewillbeabletosufficientlycompensatetheholdersofthewarrantsinaccordancewiththetermsthereof.Thewarrantprovisionsmaydelayorpreventourabilitytoundertakeastrategictransactionthatmaybebeneficialtoshareholders.Theserestrictionsmayalsoadverselyaffectthemarketpriceofourcommonshares.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
We are exposed to the financial risk related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates.
Wemaybeadverselyaffectedbyforeigncurrencyfluctuations.Todate,wehavebeenprimarilyfundedthroughissuancesofequity,proceedsfromtheexerciseofwarrantsandstockoptionsandfrominterestincomeonfundsavailableforinvestment,whicharedenominatedbothinCanadianandUSdollars.Also,asizeableportion of our expenditures are in Canadian dollars, and we are therefore subject to foreign currency fluctuations which may, from time to time, impact ourfinancialpositionandresultsofoperations.
Risks Related to Our Business and Our Industry
Our prospects depend on the success of our product candidates which are at early stages of development, and we may not generate revenue for several years, ifat all, from these products.
Giventheearlystageofourproductdevelopment, wecanmakenoassurancethat ourresearchanddevelopmentprogramswill result inregulatoryapprovalorcommercially viable products. To achieve profitable operations, we, alone or with others, must successfully develop, gain regulatory approval, and market ourfuture products. Wecurrently havenoproducts that havebeenapprovedbythe FDA,Health Canada, or anysimilar regulatory authority. Toobtain regulatoryapprovalsforourproductcandidatesbeingdevelopedandtoachievecommercialsuccess,clinicaltrialsmustdemonstratethattheproductcandidatesaresafeforhumanuseandthattheydemonstrateefficacy.WhilewehavecommencedclinicaltrialsforSIRPαFc,wehavenotyetcompletedlaterstageclinicaltrialsforanyofourproductcandidates.
Positive results from preclinical and early clinical research of TTI-621 and TTI-622 are not necessarily predictive of the results of later clinical trials of TTI-621 or TTI-622. If we cannot replicate the positive results from preclinical and early clinical research in our later clinical trials, we may be unable tosuccessfully develop, obtain regulatory approval for and commercialize TTI-621 or TTI-622.
PositiveresultsofpreclinicalandearlyclinicalresearchofTTI-621andTTI-622maynotbeindicativeoftheresultsthatwillbeobtainedinlater-stageclinicaltrials. For example, we have focused our near-term clinical product development on T-cell malignancies based on preliminary results of our intravenous andintratumoraltrials.TherecanbenoassurancethatthepreliminaryresultswehaveseeninasmallnumberofT-celllymphomapatientswillbereproducibleinalargerpopulationofpatients.Wecanmakenoassurancethatanyfuturestudies,ifundertaken,willyieldfavorableresults.
Manycompaniesinthepharmaceuticalandbiotechnologyindustrieshavesufferedsignificantsetbacksinlater-stageclinicaltrialsafterachievingpositiveresultsinearly-stagedevelopment,andwecannotbecertainthatwewillnotfacesimilarsetbacks.Thesesetbackshavebeencausedby,amongotherthings,preclinicalfindings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including previously unreported adverse events.Moreover, preclinical andclinical dataareoftensusceptible tovaryinginterpretations andanalyses, andmanycompaniesthat believedtheir product candidatesperformedsatisfactorilyinpreclinicalstudiesandclinicaltrialsnonethelessfailedtoobtainFDAapproval.Ifwefailtoproducepositiveresultsinourclinicaltrialsof TTI-621 or TTI-622, the development timeline and regulatory approval and commercialization prospects for our leading product candidates, and,correspondingly,ourbusinessandfinancialprospects,wouldbemateriallyadverselyaffected.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
We rely and will continue to rely on third parties to plan, conduct and monitor our preclinical studies and clinical trials, and their failure to perform asrequired could cause substantial harm to our business.
We rely on contract manufacturers over whom we have limited control. If we are subject to quality, cost or delivery issues with the preclinical and clinicalgrade materials supplied by contract manufacturers, our business operations could suffer significant harm.
Wehavelimitedmanufacturingexperienceandrelyoncontractmanufacturingorganizations,orCMOstomanufactureourproductcandidatesforlargerpreclinicalstudies and clinical trials. We rely on CMOs for manufacturing, filling, packaging, storing and shipping of drug product in compliance with current GoodManufacturing Practice, or cGMP, regulations applicable to our products. The FDA ensures the quality of drug products by carefully monitoring drugmanufacturers'compliancewithcGMPregulations.ThecGMPregulationsfordrugscontainminimumrequirementsforthemethods,facilitiesandcontrolsusedinmanufacturing,processingandpackagingofadrugproduct.
WecontractedwithCatalentforthemanufactureoftheSIRPαFcproteintosupplydrugsubstanceforourclinicaltrials.Themanufactureofrecombinantproteinsuses well established processes including a protein expression system. Catalent is producing SIRPαFc using their proprietary GPEx® expression system. WebelievethatCatalenthasthecapacity, thesystems,andtheexperiencetosupplySIRPαFcforourcurrentclinical trials andwemayconsiderusingCatalentformanufacturing for later clinical trials. However, since the Catalent manufacturing facility where SIRPαFc is being produced does not support commercialmanufacturing,ithasnotyetbeeninspectedbytheFDA.Anymanufacturingfailures,delaysorcomplianceissuescouldcausedelaysintheconductofSIRPαFcpreclinicalstudiesandclinicaltrials.
Therecanbenoassurancesthat CMOswill beabletomeet ourtimetable andrequirements. Wehavenot contractedwithalternate suppliers for SIRPαFcdrugsubstanceproductionintheeventCatalentisunabletoscaleupproduction,orifCatalentotherwiseexperiencesanyothersignificantproblems.Ifweareunabletoarrangeforalternativethird-partymanufacturingsourcesoncommerciallyreasonabletermsorinatimelymanner,wemaybedelayedinthedevelopmentofourproduct candidates. Further, CMOsmust operate in compliance with cGMPand failure to do so could result in, among other things, the disruption of productsupplies. Ourdependenceuponthirdparties for themanufacture of ourproducts mayadverselyaffect ourprofit marginsandourability todevelopanddeliverproductsonatimelyandcompetitivebasis.
We require commercial scale and quality manufactured product to be available for pivotal or registration clinical trials. If we do not have commercial gradedrug supply when needed, we may face delays in initiating or completing pivotal trials and our business operations could suffer significant harm.
Todate,ourproducthasbeenmanufacturedinsmallquantitiesforpreclinicalstudiesandclinicaltrialsbythird-partymanufacturers.Inordertocommercializeourproduct, weneedto manufacture commercial quality drugsupplyfor use in registration clinical trials. Most, if not all, of the clinical material usedin phase3/pivotal/registrationstudiesmustbederivedfromthedefinedcommercialprocessincludingscale,manufacturingsite,processcontrolsandbatchsize.Ifwehavenot scaledupandvalidated the commercial productionof our product prior to the commencement of pivotal clinical trials, wemayhaveto employa bridgingstrategyduringthetrialtodemonstrateequivalencyofearlystagematerialtocommercialdrugproduct,orpotentiallydelaytheinitiationorcompletionofthetrialuntil drug supply is available. The manufacturing of commercial quality drug product requires significant efforts including, but not limited to scale-up ofproductiontoanticipatedcommercialscale,processcharacterizationandvalidation,analyticalmethodvalidation,identificationofcriticalprocessparametersandproductqualityattributes,multipleprocessperformanceandvalidationruns,haslongleadtimesandisveryexpensive.Ifwedonothavecommercialdrugsupplyavailablewhenneededforpivotalclinicaltrials,ourregulatoryandcommercialprogressmaybedelayedandwemayincurincreasedproductdevelopmentcost.Thismayhaveamaterialadverseeffectonourbusiness,financialconditionandprospects,andmaydelaymarketingoftheproduct.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise producepositive results, we would incur additional costs or experience delays in completing, or ultimately be unable to complete, the development andcommercialization of our product candidates.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct preclinical studies in animals andextensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive and difficult to design andimplement,cantakemanyyearstocompleteandhasuncertainoutcomes.Theoutcomeofpreclinicalstudiesandearlyclinicaltrialsmaynotpredictthesuccessoflaterclinicaltrials,andinterimresultsofaclinicaltrialdonotnecessarilypredictfinalresults.Anumberofcompaniesinthepharmaceuticalandbiotechnologyindustrieshavesufferedsignificantsetbacksinadvancedclinicaltrialsduetolackofefficacyorunacceptablesafetyprofiles,notwithstandingpromisingresultsinearliertrials.Wedonotknowwhethertheclinicaltrialswemayconductwilldemonstrateadequateefficacyandsafetytoresultinregulatoryapprovaltomarketanyofourproductcandidatesinanyjurisdiction.Aproductcandidatemayfailforsafetyorefficacyreasonsatanystageofthetestingprocess.AmajorriskwefaceisthepossibilitythatnoneofourproductcandidatesunderdevelopmentwillsuccessfullygainmarketapprovalfromtheFDAorotherregulatoryauthorities,resultinginusbeingunabletoderiveanycommercialrevenuefromthemafterinvestingsignificantamountsofcapitalintheirdevelopment.
If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, and our business may be substantially harmed.
We cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Our productdevelopmentcostswillincreaseifweexperiencedelaysinclinicaltesting.Significantclinicaltrialdelayscouldshortenanyperiodsduringwhichwemayhavetheexclusive right to commercialize our product candidates or allow our competitors to bring products to market before us, which would impair our ability tosuccessfullycommercializeourproductcandidatesandmayharmourfinancialcondition,resultsofoperationsandprospects.Thecommencementandcompletionofclinicaltrialsforourproductsmaybedelayedforanumberofreasons,includingdelaysrelated,butnotlimited,to:
failurebyregulatoryauthoritiestograntpermissiontoproceedorplacingtheclinicaltrialonhold;patientsfailingtoenrollorremaininourtrialsattherateweexpect;suspensionorterminationofclinicaltrialsbyregulatorsformanyreasons,includingconcernsaboutpatientsafetyorfailureofourCMOstocomplywithcGMPrequirements;anychangestoourmanufacturingprocessthatmaybenecessaryordesired;delaysorfailuretoobtainclinicalsupplyfromCMOsofourproductsnecessarytoconductclinicaltrials;productcandidatesdemonstratingalackofsafetyorefficacyduringclinicaltrials;patients choosinganalternative treatment for the indications for whichweare developinganyof our product candidates or participating in competingclinicaltrials;patientsfailingtocompleteclinicaltrialsduetodissatisfactionwiththetreatment,sideeffectsorotherreasons;
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
reportsofclinicaltestingonsimilartechnologiesandproductsraisingsafetyand/orefficacyconcerns;competingclinicaltrialsandschedulingconflictswithparticipatingclinicians;clinicalinvestigatorsnotperformingourclinicaltrialsontheiranticipatedschedule,droppingoutofatrial,oremployingmethodsnotconsistentwiththeclinicaltrialprotocol,regulatoryrequirementsorotherthirdpartiesnotperformingdatacollectionandanalysisinatimelyoraccuratemanner;failureofourcontractresearchorganizations,orCROs,tosatisfytheircontractualdutiesormeetexpecteddeadlines;inspectionsofclinicaltrialsitesbyregulatoryauthoritiesorInstitutionalReviewBoards,orIRBs,orethicscommitteesfindingregulatoryviolationsthatrequireustoundertakecorrectiveaction,resultinginsuspensionorterminationofoneormoresitesortheimpositionofaclinicalholdontheentirestudy;one or more IRBs or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additionalsubjects,orwithdrawingitsapprovalofthetrial;orfailuretoreachagreementonacceptabletermswithprospectiveclinicaltrialsites.
Ourproductdevelopmentcostswill increaseif weexperiencedelaysintestingorapprovalorif weneedtoperformmoreorlargerclinical trials thanplanned.Additionally,changesinregulatoryrequirementsandpoliciesmayoccur,andwemayneedtoamendstudyprotocolstoreflectthesechanges.Amendmentsmayrequire us to resubmit our study protocols to regulatory authorities or IRBs or ethics committees for re-examination, which may impact the cost, timing orsuccessful completion of that trial. Delays or increased product development costs mayhave a material adverse effect on our business, financial condition andprospects.
We may not achieve our publicly announced milestones according to schedule, or at all.
Fromtime to time, we may announce the timing of certain events we expect to occur, such as the anticipated timing of results fromour clinical trials. Thesestatementsareforward-lookingandarebasedonthebestestimatesofmanagementatthetimerelatingtotheoccurrenceofsuchevents.However,theactualtimingofsucheventsmaydifferfromwhathasbeenpubliclydisclosed.Thetimingofeventssuchasinitiationorcompletionofaclinicaltrial,filingofanapplicationtoobtain regulatory approval, or announcement of additional clinical trials for a product candidate may ultimately vary from what is publicly disclosed. Thesevariationsintimingmayoccurasaresultofdifferentevents,includingthenatureoftheresultsobtainedduringaclinicaltrialorduringaresearchphase,timingofthecompletionofclinicaltrials,problemswithaCMOoraCROoranyothereventhavingtheeffectofdelayingthepubliclyannouncedtimeline.Weundertakenoobligationtoupdateorreviseanyforward-lookinginformation,whetherasaresultofnewinformation,futureeventsorotherwise,exceptasotherwiserequiredbylaw.Anyvariationinthetimingofpreviouslyannouncedmilestonescouldhaveamaterialadverseeffectonourbusinessplan,financialconditionoroperatingresultsandthetradingpriceofourcommonshares.
We may not be able to file INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us toproceed in a timely manner, or at all.
PriortocommencingclinicaltrialsintheUnitedStatesforanyofourproductcandidates,wemayberequiredtohaveanallowedINDforeachproductcandidateandtofileadditionalINDspriortoinitiatinganyadditionalclinicaltrialsforSIRPαFc.Webelievethatthedatafrompreviousstudieswillsupportthefilingofadditional INDs,toenableustoundertakeadditional clinical studiesaswehaveplanned. However, submissionofanINDmaynotresult intheFDAallowingfurther clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such clinical trials. Additionally, even if relevantregulatoryauthoritiesagreewiththedesignandimplementationoftheclinicaltrialssetforthinanIND,theseregulatoryauthoritiesmaychangetheirrequirementsinthefuture.FailuretosubmitorhaveeffectiveINDsandcommenceorcontinueclinicalprogramswillsignificantlylimitouropportunitytogeneraterevenue.
If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.
If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may notachieve marketing approval or realize the full commercial potential of our therapeutic product candidates.
Wemay develop companion diagnostics for our therapeutic product candidates. We expect that, at least in some cases, regulatory authorities may require thedevelopmentandregulatoryapprovalofacompaniondiagnosticasaconditiontoapprovingourtherapeuticproductcandidates.Wehavelimitedexperienceandcapabilitiesindevelopingorcommercializingdiagnosticsandplantorelyinlargepartonthirdpartiestoperformthesefunctions.Wehavenotbeguntodevelopcompaniondiagnosticsforanyofourtherapeuticproductcandidates.
Companion diagnostics are subject to regulation by the FDA, HC, and comparable foreign regulatory authorities as medical devices and may require separateregulatoryapprovalorclearancepriortocommercialization.Ifwe,oranythirdpartiesthatweengagetoassistus,areunabletosuccessfullydevelopcompaniondiagnosticsforourtherapeuticproductcandidates,orexperiencedelaysindoingso,ourbusinessmaybesubstantiallyharmed.
Regulatory approval processes are lengthy, expensive and inherently unpredictable. Our inability to obtain regulatory approval for our product candidateswould substantially harm our business.
Ourdevelopmentandcommercializationactivitiesandproductcandidatesare significantlyregulatedbyanumberof governmental entities, includingtheFDA,HC,andcomparableauthoritiesinothercountries.Regulatoryapprovalsarerequiredpriortoeachclinicaltrialandwemayfailtoobtainthenecessaryapprovalstocommence or continue clinical testing. We must comply with regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation,advertising,andsaleofproductsandproductcandidatesandultimatelymustobtainregulatoryapprovalbeforewecancommercializeaproductcandidate.Thetimerequiredtoobtainapprovalbysuchregulatoryauthoritiesisunpredictablebuttypicallytakesmanyyearsfollowingthecommencementofpreclinicalstudiesandclinicaltrials.Anyanalysisofdatafromclinicalactivitiesweperformissubjecttoconfirmationandinterpretationbyregulatoryauthorities,whichcoulddelay,limitorpreventregulatoryapproval.Evenifwebelieveresultsfromourclinicaltrialsarefavorabletosupportthemarketingofourproductcandidates,theFDAorotherregulatoryauthoritiesmaydisagree.Inaddition,approvalpolicies,regulations,orthetypeandamountofclinicaldatanecessarytogainapprovalmaychangeduring the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any productcandidateanditispossiblethatnoneofourexistingproductcandidatesoranyfutureproductcandidateswilleverobtainregulatoryapproval.
Aregulatoryauthoritymayrequiremoreinformation,includingadditionalpreclinicalorclinicaldatatosupportapproval,whichmaydelayorpreventapprovalandourcommercializationplans,orwemaydecidetoabandonthedevelopmentprogram.Ifweweretoobtainapproval,regulatoryauthoritiesmayapproveanyofourproductcandidatesforfewerormorelimitedindicationsthanwerequest,maygrantapprovalcontingentontheperformanceofcostlypost-marketingclinicaltrials,or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of thatproductcandidate.Moreover,dependingonanysafetyissuesassociatedwithourproductcandidatesthatgarnerapproval,theFDAmayimposeariskevaluationandmitigationstrategy,therebyimposingcertainrestrictionsonthesaleandmarketabilityofsuchproducts.
We face competition from other biotechnology and pharmaceutical companies and our financial condition and operations will suffer if we fail to effectivelycompete.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Our competitors includelarge,well-establishedpharmaceuticalcompanies,biotechnologycompanies,andacademicandresearchinstitutionsdevelopingcancertherapeuticsforthesameindicationswearetargetingandcompetitorswithexistingmarketedtherapies.Manyothercompaniesaredevelopingorcommercializingtherapiestotreatthesamediseasesorindicationsforwhichourproductcandidatesmaybeuseful.AlthoughtherearenoapprovedtherapiesthatspecificallytargettheCD47pathway,somecompetitorsusetherapeuticapproachesthatmaycompetedirectlywithourproductcandidates.Forexample,SIRPαFcisindirectcompetitionwithCD47blockingantibodiesfromFortySevenInc.,CelgeneCorporation,TGTherapeuticsandothers.
Many of our competitors have substantially greater financial, technical and human resources than we do and have significantly greater experience than us inconductingpreclinicaltestingandhumanclinicaltrialsofproductcandidates,scalingupmanufacturingoperationsandobtainingregulatoryapprovalsofproducts.Accordingly,ourcompetitorsmaysucceedinobtainingregulatoryapprovalforproductsmorerapidlythanwedo.Ourabilitytocompetesuccessfullywilllargelydependon:
If wearenot abletocompeteeffectivelyagainst ourcurrent andfuturecompetitors, ourbusinesswill not growandourfinancial conditionandoperationswillsubstantiallysuffer.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
We heavily rely on the capabilities and experience of our key executives and scientists and the loss of any of them could affect our ability to develop ourproducts.
Our success will depend in large measure on the ability, expertise, judgment, discretion, integrity and good faith of our key executives and other personnelconducting our business. Our management structure has undergone changes in 2019 due to the resignation in April 2019 of our former President and ChiefExecutiveOfficeranddirector,andtheappointmentinSeptember2019ofournewPresidentandChiefExecutiveOfficeranddirector,Dr.JanSkvarka.Dr.RobertL.Kirkman,M.D.,theChairoftheBoardservedasExecutiveChairfromApril 29,2019toMarch31,2020,andDr.RobertUger,thecurrentChiefScientificOfficer,servedasadirectorfromApril30,2019toFebruary6,2020.WehaveemploymentagreementswithDr.Skvarka,Dr.KirkmanandDr.Uger,andotherkeymembersofourstaff,andinMay2019theBoardputagreementsinplaceforkeyexecutivesandstafftoencourageretention,althoughsuchagreementsdonotguaranteetheirretention.Thistransitionmaycausesomedisruptiontoourbusiness,andmayhaveanadverseeffectonourbusiness,operatingresultsorfinancialcondition.
Wealsodependonourscientificandclinicalcollaboratorsandadvisors,allofwhomhaveoutsidecommitmentsthatmaylimittheiravailabilitytous.Inaddition,we believe that our future success will depend in large part upon our ability to attract and retain highly skilled scientific, managerial, medical, manufacturing,clinical,commercialandregulatorypersonnel,particularlyasweexpandouractivitiesandseekregulatoryapprovalsforclinicaltrials.Weenterintoagreementswithourscientific andclinical collaborators andadvisors, keyopinionleadersandacademicpartners intheordinarycourseofourbusiness. Wealsoenterintoagreementswithphysiciansandinstitutionswhowillrecruitpatientsintoourclinicaltrialsonourbehalfintheordinarycourseofourbusiness.Notwithstandingthesearrangements,wefacesignificantcompetitionforthesetypesofpersonnelfromothercompanies,researchandacademicinstitutions,governmententitiesandother organizations. Wecannot predict our success in hiringor retainingthe personnel werequire for continuedgrowth. Theloss of the services of anyof ourexecutiveofficersorotherkeypersonnelcouldpotentiallyharmourbusiness,operatingresultsorfinancialcondition.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which couldhave a material adverse effect on our business.
Weare exposed to the risk of employee fraud or other misconduct. Misconduct byemployees could include failures to comply with FDAregulations, provideaccurateinformationtotheFDA,complywithmanufacturingstandardswehaveestablished,complywithfederalandstatehealthcarefraudandabuselawsandregulations,reportfinancialinformationordataaccuratelyordiscloseunauthorizedactivitiestous.Inparticular,sales,marketingandbusinessarrangementsinthehealthcareindustryaresubjecttoextensivelawsandregulationsintendedtopreventfraud,kickbacks, self-dealing, andotherabusivepractices. Theselawsandregulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and otherbusiness arrangements. Employeemisconduct couldalsoinvolvetheimproper useof informationobtainedin thecourse of clinical trials, whichcouldresult inregulatorysanctionsandseriousharmtoourreputation.Ifanysuchactionsareinstitutedagainstus,andwearenotsuccessfulindefendingourselvesorassertingourrights,thoseactionscouldhaveasubstantialimpactonourbusinessandresultsofoperations,includingtheimpositionofsubstantialfinesorothersanctions.
We may expand our business through the acquisition of companies or businesses or by entering into collaborations or by in-licensing product candidates, eachof which could disrupt our business and harm our financial condition.
We have in the past and may in the future seek to expand our pipeline and capabilities by acquiring one or more companies or businesses, entering intocollaborations,orin-licensingoneormoreproductcandidates.Acquisitions,collaborationsandin-licensesinvolvenumerousrisks,including,butnotlimitedto:
We have experience in making acquisitions, entering collaborations, and in-licensing product candidates, however, we cannot provide assurance that anyacquisition,collaborationorin-licensewillresultinshort-termorlong-termbenefitstous.Wemayincorrectlyjudgethevalueorworthofanacquiredcompanyorbusinessorin-licensedproductcandidate.Inaddition,ourfuturesuccesswoulddependinpartonourabilitytomanagetherapidgrowthassociatedwithsomeoftheseacquisitions,collaborationsandin-licenses.Wecannotprovideassurancethatwewouldbeabletosuccessfullycombineourbusinesswiththatofacquiredbusinesses, manage a collaboration or integrate in-licensed product candidates. Furthermore, the development or expansion of our business may require asubstantialcapitalinvestmentbyus.
Negative results from clinical trials or studies of others and adverse safety events involving the targets of our products may have an adverse impact on ourfuture commercialization efforts.
We face the risk of product liability claims, which could exceed our insurance coverage and produce recalls, each of which could deplete our cash resources.
Weareexposedtotheriskofproductliabilityclaimsallegingthatuseofourproductcandidatescausedaninjuryorharm.Theseclaimscanariseatanypointinthedevelopment, testing, manufacture, marketing or sale of our product candidates and maybe made directly by patients involved in clinical trials of our productcandidates,byconsumersorhealthcareprovidersorbyindividuals,organizationsorcompaniessellingourproducts.Productliabilityclaimscanbeexpensivetodefend,eveniftheproductorproductcandidatedidnotactuallycausetheallegedinjuryorharm.
Insurancecoveringproductliabilityclaimsbecomesincreasinglyexpensiveasaproductcandidatemovesthroughthedevelopmentpipelinetocommercialization.Wecurrentlymaintainclinicaltrialliabilityinsurancecoverageof$10,000.However,therecanbenoassurancethatsuchinsurancecoverageisorwillcontinuetobeadequateoravailabletousatacostacceptabletousoratall.Wemaychooseorfinditnecessaryunderourcollaborativeagreementstoincreaseourinsurancecoverage in the future. We may not be able to secure greater or broader product liability insurance coverage on acceptable terms or at reasonable costs whenneeded.Anyliabilityfordamagesresultingfromaproductliabilityclaimcouldexceedtheamountofourcoverage,requireustopayasubstantialmonetaryawardfrom our own cash resources and have a material adverse effect on our business, financial condition and results of operations. Moreover, a product recall, ifrequired, could generate substantial negative publicity about our products and business, inhibit or prevent commercialization of other products and productcandidatesornegativelyimpactexistingorfuturecollaborations.
If we are unable to maintain product liability insurance required by our third parties, the corresponding agreements would be subject to termination, whichcould have a material adverse impact on our operations.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Risks Related to Intellectual Property
If we are unable to adequately protect and enforce our intellectual property, our competitors may take advantage of our development efforts or acquiredtechnology and compromise our prospects of marketing and selling our key products.
WecontroltwomainpatentfamiliesrelatingtoSIRPα.OnefamilyrelatestotheuseofSIRPαtotreatcancer.Theotherfamilyrelatestoourdrugasacompositionofmatter, SIRPαFc.WehavealsofiledforpatentprotectioncoveringadditionalinventionsrelatingtoSIRPα,includinganti-cancerdrugcombinationtherapiesthatutilizeSIRPαFc,andbiomarkersthatidentifySIRPαFcresponders.Oursuccesswilldependinpartuponourabilitytoprotectourintellectual propertyandproprietary technologies and upon the nature and scope of the intellectual property protection we receive. For example, some of our patent portfolio coversprimarily methods of medical use but not compositions of matter. The ability to compete effectively and to achieve partnerships will depend on our ability todevelopandmaintainproprietaryaspectsofourtechnologyandtooperatewithoutinfringingontheproprietaryrightsofothers.Thepresenceofsuchproprietaryrightsofotherscouldseverelylimitourabilitytodevelopandcommercializeourproducts,toconductourexistingresearchandcouldrequirefinancialresourcestodefendlitigation, whichmaybeinexcessofourabilitytoraisesuchfunds. Thereisnoassurancethat ourpendingpatentapplicationsoranythat weintendtoacquirewillbeapprovedinaformthatwillbesufficienttoprotectourproprietarytechnologyandgainorkeepanycompetitiveadvantagethatwemayhaveor,onceapproved,willbeupheldinanypost-grantproceedingsbroughtbyanythirdparties.
Thepatentpositionsofpharmaceutical companiescanbehighlyuncertainandinvolvecomplexlegal, scientific andfactual questionsforwhichimportant legalprinciples remain unresolved. Patents issued to us or our respective licensors may be challenged, invalidated or circumvented. To the extent our intellectualproperty,includinglicensedintellectualproperty,offersinadequateprotection,orisfoundtobeinvalidorunenforceable,weareexposedtoagreaterriskofdirectcompetition. If our intellectual property does not provide adequate protection against our competitors' products, our competitive position could be adverselyaffected,ascouldourbusiness,financialconditionandresultsofoperations.Boththepatentapplicationprocessandtheprocessofmanagingpatentdisputescanbetimeconsumingandexpensive,andthelawsofsomeforeigncountriesmaynotprotectourintellectualpropertyrightstothesameextentasdothelawsofCanadaandtheUnitedStates.
Wehavealsoenteredinto agreements allowingus to manufacture SIRPαFcusingCatalent's proprietary GPEx®expressionsystem. Theconsideration includespaymentsatthetimewesuccessfullyreachaseriesofdevelopmentandsalesmilestones.Wemayalsoenterintolicensesinthefuturetoaccessadditionalthird-partyintellectualproperty.
If we fail to pay annual maintenance fees, development and sales milestones, or it is determined that we did not use commercially reasonable efforts tocommercializelicensedproducts,wecouldloseourlicenseswhichcouldhaveamaterialadverseeffectonourbusinessandfinancialcondition.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
We may require additional third-party licenses to effectively develop and manufacture our key products and are currently unable to predict the availability orcost of such licenses.
Changes in patent law and its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property rights, particularly patents.Obtaining and enforcing patents in the biopharmaceutical industry involves technological and legal complexity, and obtaining and enforcing biopharmaceuticalpatentsiscostly,time-consumingandinherentlyuncertain.TheUSSupremeCourthasruledonseveralpatentcasesinrecentyears,eithernarrowingthescopeofpatentprotectionavailableincertaincircumstancesorweakeningtherightsofpatentownersincertainsituations.Inadditiontoincreasinguncertaintywithregardto our and our licensors' or collaborators' ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value ofpatents, once obtained. Depending on decisions by the US Congress, the federal courts, and the US Patent and Trademark Office, or USPTO, the laws andregulationsgoverningpatents couldchangeinunpredictable waysthat wouldweakenourandourlicensors' or collaborators' ability toobtainnewpatents or toenforceexistingpatentsandpatentsweandourlicensorsorcollaboratorsmayobtaininthefuture.
Recentpatentreformlegislationcouldincreasetheuncertaintiesandcostssurroundingtheprosecutionofourandourlicensors'orcollaborators'patentapplicationsand the enforcement or defense of our or our licensors' or collaborators' issued patents. OnSeptember 16, 2011, the Leahy-Smith America Invents Act, or theLeahy-SmithAct,wassignedintolaw.TheLeahy-SmithActincludesanumberofsignificantchangestoUSpatentlaw.Theseincludeprovisionsthataffectthewaypatentapplicationsareprosecutedandmayalsoaffectpatentlitigation.TheUSPTOdevelopednewregulationsandprocedurestogovernadministrationoftheLeahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, onlybecameeffectiveonMarch16,2013.Accordingly,itisnotclearwhat,ifany,impacttheLeahy-SmithActwillhaveontheoperationofourbusiness.However,theLeahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors' or collaborators' patentapplications and the enforcement or defense of our or our licensors' or collaborators' issued patents, all of which could have a material adverse effect on ourbusinessandfinancialcondition.
Litigation regarding patents, patent applications, and other proprietary rights may be expensive, time consuming and cause delays in the development andmanufacturing of our key products.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Ifweareunabletoavoidinfringingthepatentrightsofothers,wemayberequiredtoseekalicense,defendaninfringementaction,orchallengethevalidityofthepatents in court. Regardless of the outcome, patent litigation is costly andtimeconsuming. In somecases, wemaynot havesufficient resources to bringtheseactionstoasuccessful conclusion. Inaddition, if wedonotobtainalicense, developorobtainnon-infringingtechnology,fail todefendaninfringementactionsuccessfullyorhaveinfringedpatentsdeclaredinvalid,wemay:
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them.
Becausewerelyonthirdpartiestodevelopourproducts,wemustsharetradesecretswiththem.Weseektoprotectourproprietarytechnologyinpartbyenteringinto confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similaragreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreementstypically restrict theability of our collaborators, advisors, employeesandconsultants topublishdatapotentially relatingtoourtradesecrets. Ouracademicandclinicalcollaboratorstypicallyhaverightstopublishdata,providedthatwearenotifiedinadvanceandmaydelaypublicationforaspecifiedtimeinordertosecureourintellectualpropertyrightsarisingfromthecollaboration.Inothercases,publicationrightsarecontrolledexclusivelybyus,althoughinsomecaseswemaysharetheserightswithotherparties.Wemayalsoconductjointresearchanddevelopmentprogramswhichmayrequireustosharetradesecretsunderthetermsofresearch and development collaboration or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets,either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not haveproprietaryorotherwiseprotectedrightsatthetimeofpublication.Acompetitor'sdiscoveryofourtradesecretsmayimpairourcompetitivepositionandcouldhaveamaterialadverseeffectonourbusinessandfinancialcondition.
Risks Related to Our Common Shares
Our common share price has been volatile in recent years, and may continue to be volatile.
Themarketpricesforsecuritiesofbiopharmaceuticalcompanies,includingours,havehistoricallybeenvolatile.InthethreemonthsendedMarch31,2020,ourcommonsharestradedontheNasdaqatahighof$7.97andalowof$1.05pershareandontheTSXatahighofCDN$10.69andalowofCDN$1.37pershare.IntheyearendedDecember31,2019,ourcommonsharestradedontheNasdaqatahighof$2.13andalowof$0.24pershareandontheTSXatahighofCDN$2.76andalowofCDN$0.30pershare.Anumberoffactorscouldinfluencethevolatilityinthetradingpriceofourcommonshares,includingchangesintheeconomyorinthefinancialmarkets,industryrelateddevelopments,theresultsofproductdevelopmentandcommercialization,changesingovernmentregulations,and developments concerning proprietary rights, litigation and cash flow. Our quarterly losses may vary because of the timing of costs for manufacturing,preclinicalstudiesandclinicaltrials.Also,thereportingofadversesafetyeventsinvolvingourproductsandpublicrumorsaboutsucheventscouldcauseoursharepricetodeclineorexperienceperiodsofvolatility.Eachofthesefactorscouldleadtoincreasedvolatilityinthemarketpriceofourcommonshares.Inaddition,changesinthemarketpricesofthesecuritiesofourcompetitorsmayalsoleadtofluctuationsinthetradingpriceofourcommonshares.
We have never paid dividends and do not expect to do so in the foreseeable future.
TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Future sales or issuances of equity securities and the conversion of outstanding securities to common shares could decrease the value of the common shares,dilute investors' voting power, and reduce our earnings per share. There are a large number of common shares underlying our outstanding options andwarrants and the exercise of these options and/or warrants may depress the market price of our common shares and cause immediate and substantial dilutionto our existing stockholders.
As of March 31, 2020, we had 82,683,425 common shares issued and outstanding, preferred shares convertible into an additional 8,000,000 common shares,outstandingoptionstopurchase5,002,062commonsharesandoutstandingwarrantstopurchase3,915,283commonsharesand5,400,000SeriesIIFirstPreferredShares,respectively.Theissuanceofcommonsharesuponexerciseofouroutstandingoptionsandwarrants,ortheconversionofourpreferredshares,willcauseimmediateandsubstantialdilutiontoourstockholders.
We may sell additional equity securities in future offerings, including through the sale of securities convertible into equity securities, to finance operations,acquisitionsorprojects,andissueadditionalcommonsharesifoutstandingwarrantsorstockoptionsareexercised,orpreferredsharesareconvertedtocommonshares, which may result in dilution. See the information in the section of this MD&A entitled "Description of Share Capital" for details of our outstandingsecuritiesconvertibleintocommonshares.IntheFebruary2019publicoffering,weissuedwarrantswithapriceprotectionfeaturethatresetstheexercisepriceofthewarrantundercertainconditionsincludingtheissuanceofcommonshares,orsecuritiesconvertibleintocommonshares,atpricesbelowtheexercisepriceof$0.96.
We expect to lose our foreign private issuer status which will require us to comply with the US domestic reporting regime under the Exchange Act and result insignificant additional compliance activity and increased costs and expenses.
Wearecurrentlya"foreignprivateissuer,"assuchtermisdefinedinRule405undertheSecuritiesAct,and,therefore,wearenotrequiredtocomplywithalltheperiodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. As a result, there may currently be less publiclyavailableinformationaboutusthanifwewereaUnitedStatesdomesticissuer.Forexample,currentlywearenotsubjecttotheproxyrulesintheUnitedStatesanddisclosurewithrespecttoourannualmeetingswillbegovernedbyCanadianrequirements.UnderRule405,thedeterminationofforeignprivateissuerstatusismadeannuallyonthelast businessdayofanissuer's most recentlycompletedsecondfiscal quarter and, accordingly, thenextdeterminationwill bemadewithrespect to us on June 30, 2020. We expect to lose our foreign private issuer status on the next determination date since (i) we believe at least 50% of ouroutstandingcommonshareswereheldbyUSresidentsand(ii) themajorityofourdirectorsareUScitizens, whichwedonotexpecttochangebeforethenextdeterminationdate.Asaresult,weexpecttoberequiredtocomplywithUSdomesticissuerrequirementsbeginningJanuary1,2021.
TheregulatoryandcompliancecoststousunderUSsecuritieslawsasaUSdomesticissuermaybesignificantlymorethancostsweincurasaforeignprivateissuer. If wearenotaforeignprivateissuer, wewill berequiredtofileperiodicreportsandregistrationstatementsonUSdomesticissuerformswiththeSEC,which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We will be required under current SECrules toprepareourconsolidatedfinancialstatementsinaccordancewithUSgenerallyacceptedaccountingprinciples("USGAAP")andmodifycertainofourpoliciestocomply with corporate governance practices associated with US domestic issuers. In addition, we may lose our ability to rely upon exemptions from certaincorporategovernancerequirementsonUSstockexchangesthatareavailabletoforeignprivateissuers,andexemptionsfromrequirementsrelatedtothepreparationandsolicitationofproxies(includingcompliancewithfull disclosureobligationsregardingexecutivecompensationinproxystatementsandtherequirementsofholdinganonbindingadvisoryvoteoncertain executive compensationmatters, suchas "sayonpay"and"sayonfrequency"). Moreover, wewill nolonger beexemptfromcertainoftheprovisionsofUSsecuritieslaws,suchasRegulationFD(whichrestrictstheselectivedisclosureofmaterialinformation),exemptionsforfilingbeneficialownershipreportsunderSection16(a)forofficers,directorsand10%shareholdersandtheSection16(b)shortswingprofitrules.Inlightofourexpectations,wehavealreadystartedtopreparefortheconsequencesofbecomingaUSdomesticissuer,includingthosedescribedabove,andweexpectthatthelossofforeignprivateissuerstatuswill increaseourlegalandfinancial compliancecostsandwill makesomeactivitieshighlytime-consumingandcostly. Theadditionalcostscouldhaveanadverseimpactonourresultsofoperations,financialpositionandcashflows.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
US holders of 10% or more of the voting power of our common shares may be subject to US federal income taxation at ordinary income tax rates onundistributed earnings and profits.
Thereisariskthatwewillbeclassifiedasacontrolledforeigncorporation,orCFC,forUSfederalincometaxpurposes.WewillgenerallybeclassifiedasaCFCif more than 50% of our outstanding shares, measured by reference to voting power or value, are owned (directly, indirectly or by attribution) by "USShareholders." For this purpose, a "USShareholder" is anyUSpersonthat ownsdirectly, indirectly or byattribution, 10%or moreof thevotingpowerof ouroutstandingshares.IfweareclassifiedasaCFC,aUSShareholdermaybesubjecttoUSincometaxationatordinaryincometaxratesonalloraportionofourundistributedearningsandprofitsattributableto"subpartFincome"andmayalsobesubjecttotaxatordinaryincometaxratesonanygainrealizedonasaleofcommonshares,totheextentofourcurrentandaccumulatedearningsandprofitsattributabletosuchshares.TheCFCrulesarecomplexandUSShareholdersofourcommonsharesareurgedtoconsulttheirowntaxadvisorsregardingthepossibleapplicationoftheCFCrulestothemintheirparticularcircumstances.
We are likely a "passive foreign investment company," which may have adverse US federal income tax consequences for US shareholders.
USinvestorsshouldbeawarethatwebelievewewereclassifiedasaPFICduringthetaxyearsendedDecember31,2019and2018,andbasedoncurrentbusinessplansandfinancialexpectations,webelievethatwemaybeaPFICforthecurrenttaxyearandmaybeaPFICinfuturetaxyears.IfweareaPFICforanyyearduringaUSshareholder'sholdingperiodofourcommonsharesorSeriesIIFirstPreferredShares,thensuchUSshareholdergenerallywillberequiredtotreatanygainrealizeduponadispositionofourcommonsharesorSeriesIIFirstPreferredShares,oranyso-called"excessdistribution"receivedonourcommonsharesorSeriesIIFirstPreferredShares,asordinaryincome,andtopayaninterestchargeonaportionofsuchgainordistributions,unlesstheshareholdermakesatimelyandeffective"qualifiedelectingfund"election, orQEF Election, or a"mark-to-market" electionwithrespect toourcommonsharesor SeriesII First PreferredShares.AUSshareholderwhomakesaQEFElectiongenerallymustreportonacurrentbasisitsshareofournetcapitalgainandordinaryearningsforanyyearinwhichweareaPFIC,whichmayormaynotbereadilyavailable,whetherornotwedistributeanyamountstoourshareholders.AUSshareholderwhomakesthemark-to-market election generally must include as ordinary incomeeach year the excess of the fair market value of the commonshares over the shareholder'sadjusted tax basis therein. A mark-to-market election is not expected to be available with respect to our Series II First Preferred Shares. Each USshareholdershould consult its owntax advisors regarding the PFICrules andthe USfederal incometax consequences of the acquisition, ownership anddisposition of ourcommonsharesorSeriesIIFirstPreferredShares.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
The effect of comprehensive US tax reform legislation on the Company is uncertain.
OnDecember22,2017,theUSgovernmentenactedH.R.1,"AnActtoprovideforreconciliationpursuanttotitlesIIandVoftheconcurrentresolutiononthebudgetforfiscalyear2018"(informallytitledthe"TaxCutsandJobsAct").AmonganumberofsignificantchangestotheUSfederalincometaxrules,theTaxCuts and Jobs Act reduces the marginal UScorporate incometax rate from35%to 21%, limits the deduction for net interest expense, shifts the United Statestowardamoreterritorialtaxsystem,andimposesnewtaxestocombaterosionoftheUSfederalincometaxbase,suchasaone-timetaxonearningsofcertainforeignsubsidiaries that werepreviouslytaxdeferredandanewminimumtaxonforeignearnings. Theeffects of theTaxCutsandJobsActontheCompany,whether adverse or favorable, are uncertain, and may not become evident for some period of time, but could have a material adverse effect on our business,financialpositionorresultsfromoperations.
It may be difficult for non-Canadian investors to obtain and enforce judgments against us because of our Canadian incorporation and presence.
WeareacorporationexistingundertheBCBCA.Someofourofficers,directors,andexpertsareCanadianresidents,andmanyofourassetsortheassetsofourofficers and directors are located outside the United States. Wehave appointed an agent for service of process in the United States, but it maybe difficult forholdersofcommonshareswhoresideintheUnitedStatestoeffectservicewithintheUnitedStatesuponthosedirectors,officersandexpertswhoarenotresidentsoftheUnitedStates.ItmayalsobedifficultforholdersofcommonshareswhoresideintheUnitedStatestorealizeintheUnitedStatesuponjudgmentsofcourtsoftheUnitedStatespredicateduponourcivilliabilityandthecivilliabilityofourofficersanddirectorsundertheUnitedStatesfederalsecuritieslaws.InvestorsshouldnotassumethatCanadiancourts(i) wouldenforcejudgmentsofUnitedStatescourtsobtainedinactionsagainst usorsuchdirectors, officersorexpertspredicateduponthecivilliabilityprovisionsoftheUnitedStatesfederalsecuritieslawsorthesecuritiesor"bluesky"lawsofanystateorjurisdictionoftheUnitedStatesor(ii)wouldenforce,inoriginalactions,liabilitiesagainstusorsuchdirectors,officersorexpertspredicatedupontheUnitedStatesfederalsecuritieslawsoranysecuritiesor"bluesky"lawsofanystateorjurisdictionoftheUnitedStates.Inaddition,theprotectionsaffordedbyCanadiansecuritieslawsmaynotbeavailabletoinvestorsintheUnitedStates.
While we currently qualify as an emerging growth company under the JOBS Act, we will cease to be an emerging growth company on or before the end of2020, and, to the extent we do not qualify as a smaller reporting company, at such time our costs and the demands placed upon our management will increase.
Asanemerginggrowthcompanyunder theJOBSAct, wearepermittedto, andintendto, relyonexemptionsfromcertaindisclosure requirements. While wecurrentlyqualifyasanemerginggrowthcompanyundertheJOBSAct,wewillceasetobeanemerginggrowthcompanyonorbeforetheendof2020,and,totheextentwedonotqualifyasasmallerreportingcompany,atsuchtimeourcostsandthedemandsplaceduponourmanagementwillincreaseunlesswesubsequentlyqualify as a smaller reporting company. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from variousreporting requirements that are applicable to other public companies that are not emerging growthcompanies, includingnot beingrequired to complywith theauditorattestationrequirementsofSection404oftheSarbanes-OxleyAct,reduceddisclosureobligationsregardingexecutivecompensationinourperiodicreportsand exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachutepaymentsnotpreviouslyapproved.Onceweceasetobeanemerginggrowthcompany,wemayqualifyasasmallerreportingcompany,andifsoqualified,wewillremainasmallerreportingcompanyforsolongas(i)ourvotingandnon-votingcommonstockheldbynon-affiliatesislessthan$250millionmeasuredonthelastbusinessdayofoursecondfiscalquarteror(ii)ourannualrevenueislessthan$100millionduringthemostrecentlycompletedfiscalyearandourvotingandnon-votingcommonstockheldbynon-affiliatesislessthan$700millionmeasuredonthelastbusinessdayofoursecondfiscalquarter.Similartoemerginggrowthcompanies,smallerreportingcompaniesareabletoprovidesimplifiedexecutivecompensationdisclosure,areexemptfromtheauditorattestationrequirementsofSection404,andhavecertainotherreduceddisclosureobligations, including,amongotherthings,beingrequiredtoprovideonlytwoyearsofauditedfinancialstatements. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find ourcommonshareslessattractiveasaresult,theremaybealessactivetradingmarketforourcommonsharesandoursharepricemaybemorevolatile.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
Any failure to maintain an effective system of internal controls may result in material misstatements of our consolidated financial statements or cause us to failto meet our reporting obligations or fail to prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which wouldharm our business and could negatively impact the price of our common shares.
Effectiveinternalcontrolsarenecessaryforustoprovidereliablefinancialreportsandpreventfraud.Ifwefailtomaintainaneffectivesystemofinternalcontrols,wemightnotbeabletoreportourfinancialresultsaccuratelyorpreventfraud;andinthatcase,ourshareholderscouldloseconfidenceinourfinancialreporting,which would harmour business and could negatively impact the price of our common shares. While we believe that we have sufficient personnel and reviewprocedurestoallowustomaintainaneffectivesystemofinternalcontrols,wecannotprovideassurancethatwewillnotexperiencepotentialmaterialweaknessesinourinternal control. Evenif weconcludethatourinternal controloverfinancial reportingprovidesreasonableassuranceregardingthereliability offinancialreportingandthepreparationofconsolidatedfinancial statementsforexternal purposesinaccordancewithIFRSasissuedbytheIASB,becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectfraudormisstatements.Failuretoimplementrequiredneworimprovedcontrols,ordifficultiesencounteredintheirimplementation,couldharmourresultsofoperationsorcauseustofailtomeetourfuturereportingobligations.
Ifwefailtotimelyachieveandmaintaintheadequacyofourinternalcontroloverfinancialreporting,wemaynotbeabletoproducereliablefinancialreportsorhelp prevent fraud. Our failure to achieve and maintain effective internal control over financial reporting could prevent us fromcomplying with our reportingobligationsonatimelybasis,whichcouldresultinthelossofinvestorconfidenceinthereliabilityofourconsolidatedfinancialstatements,harmourbusinessandnegativelyimpactthetradingpriceofourcommonshares.
Our charter documents and certain Canadian legislation could delay or deter a change of control, limit attempts by our shareholders to replace or remove ourcurrent management and limit the market price of our common shares.
OurauthorizedpreferredsharesareavailableforissuancefromtimetotimeatthediscretionofourBoardofDirectors,withoutshareholderapproval.OurarticlesgrantourBoardofDirectorstheauthoritytodeterminethespecialrightsandrestrictionsgrantedtoorimposedonanyunissuedseriesofpreferredshares,andthoserightsmaybesuperiortothoseofourcommonshares.Further,theInvestmentCanadaActsubjectsanyacquisitionofcontrolofacompanybyanon-Canadiantogovernment review if the value of the assets as calculated pursuant to the legislation exceeds a threshold amount or in other circumstances determined at thediscretionoftheCanadiangovernment.Areviewableacquisitionmaynotproceedunlesstherelevantministerissatisfiedthattheinvestmentislikelytobeofnetbenefit to Canada and the Canadian government is satisfied that no other important concerns arise fromthe acquisition of control. Anyof the foregoing couldpreventordelayachangeofcontrolandmaydepriveorlimitstrategicopportunitiestoourshareholderstoselltheirshares.
DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
These internal controls include disclosure controls and procedures designed to ensure that information required to be disclosed by us is accumulated andcommunicatedasappropriatetoallowtimelydecisionsregardingrequireddisclosure.
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TRILLIUM THERAPEUTICS INCManagement’s Discussion and Analysis
1. Review: IhavereviewedtheinterimfinancialreportandinterimMD&A(together,the"interimfilings")ofTrillium Therapeutics Inc. (the"issuer")fortheinterimperiodendedMarch 31, 2020.
2. No misrepresentations: Basedonmyknowledge,havingexercisedreasonablediligence,theinterimfilingsdonotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactrequiredtobestatedorthatisnecessarytomakeastatementnotmisleadinginlightofthecircumstancesunderwhichitwasmade,withrespecttotheperiodcoveredbytheinterimfilings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) andinternalcontroloverfinancialreporting(ICFR),asthosetermsaredefinedinNationalInstrument52-109Certification of Disclosure in Issuers' Annual andInterim Filings, fortheissuer.
5.1Control framework: Thecontrol framework the issuer's other certifying officer andI used to design the issuer's ICFRis the Internal Control - IntegratedFramework(COSO2013Framework)publishedbyTheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.
1. Review: IhavereviewedtheinterimfinancialreportandinterimMD&A(together,the"interimfilings")ofTrillium Therapeutics Inc. (the"issuer")fortheinterimperiodendedMarch 31, 2020.
2. No misrepresentations: Basedonmyknowledge,havingexercisedreasonablediligence,theinterimfilingsdonotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactrequiredtobestatedorthatisnecessarytomakeastatementnotmisleadinginlightofthecircumstancesunderwhichitwasmade,withrespecttotheperiodcoveredbytheinterimfilings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) andinternalcontroloverfinancialreporting(ICFR),asthosetermsaredefinedinNationalInstrument52-109Certification of Disclosure in Issuers' Annual andInterim Filings, fortheissuer.
5.1Control framework: Thecontrol framework the issuer's other certifying officer andI used to design the issuer's ICFRis the Internal Control - IntegratedFramework(COSO2013Framework)publishedbyTheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.
5.2N/A
5.3N/A
6. Reporting changes in ICFR: Theissuer hasdisclosedinits interimMD&Aanychangeintheissuer's ICFRthat occurredduringtheperiodbeginningonJanuary 1, 2020 andendedon March 31, 2020 thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theissuer'sICFR.
TRILLIUM THERAPEUTICS REPORTS FIRST QUARTER 2020FINANCIAL AND OPERATING RESULTS
CAMBRIDGE, MA, May 15, 2020 - Trillium Therapeutics Inc. ("Trillium" or the "Company") (NASDAQ/TSX: TRIL), aclinicalstageimmuno-oncologycompanydevelopinginnovativetherapiesforthetreatmentofcancer,todayreportedfinancialandoperatingresultsforthethreemonthsendedMarch31,2020.
"Wehadanotherstrongquarterandareofftoagreatstartin2020,"saidJanSkvarka,Trillium'sPresidentandChiefExecutiveOfficer."Wereportedencouragingdata for our novel CD47 checkpoint inhibitors TTI-621 and TTI-622, raised $117 million in funding from leading healthcare investors, and made substantialprogressbyadvancingourongoingTTI-621andTTI-622doseescalationstudies. Atthesametime,thefirst quarterpresenteditsownuniquechallengesaswenavigatedtheCOVID-19pandemic.Inspiteofthesechallenges,wecontinuetoexecuteonourkeystrategicobjectives,andallemployeesremainhealthyandsafe.WecontinuetobenefitfromtherestructuringoftheCompany'sfootprintandresettingofourstrategyin2019."
First Quarter 2020 Business Highlights:
COVID-19PandemicandBusinessContinuityInMarch,Trilliuminstitutedano-travelandwork-from-homepolicyforallemployees,withcertainexceptionsforlabpersonnelwhoanalyzeperishablepatientsamplesfromongoingclinicalstudies.Clinicaldevelopmentstudiesareongoingandallactivepatientsarecontinuingontreatment.Enrollmentremainsopen,althoughthepaceofenrollmentisexpectedtobeslowerforanuncertainperiodduetoCOVID-19relatedrestrictionsandpatientrisks.Trilliumhassufficient drugsupplyinventorytocomplete its ongoingdoseescalationstudies. TheCompanyhasnot experiencedanydisruptionsinitsdrugsupplychaintodate,butismonitoringclosely.
ClinicalDevelopmentOnJanuary7,Trilliumprovidedadataupdateontheongoingdoseescalationstudies.ThedataconfirmedTTI-621'suniquemonotherapyactivity,aswellasTTI-622'sstrongsafetyprofile.DoseescalationforTTI-621isongoingandthestudyiscurrentlyenrollingpatientsinthe1.4mg/kgcohort.Thisdosinglevelrepresentsseventimesthedoselevel(0.2mg/kg)atwhichinitialsignalofsingleagentactivitywasobserved.The TTI-622 dose escalation study is currently dosing at 8.0 mg/kg. An update of this study will be presented by Dr. Krish Patel of Swedish CancerInstitute on behalf of the study investigators at the "Developmental Therapeutics-Immunotherapy" session of theASCO20 Virtual Scientific ProgrambeingheldonMay29-31.
First Quarter 2020 Financial Results:AsofMarch31,2020,Trilliumhadcashandcashequivalentsandmarketablesecurities,andworkingcapitalof$135.1millionand$115.2million,respectively,compared to $22.7 million and $9.8 million, respectively at December 31, 2019. The increase in cash and cash equivalents and marketable securities, and theincreaseinworkingcapitalwereduemainlytoproceedsfromtheunderwrittenpublicofferingcompletedinJanuary2020andexerciseofwarrants.
NetlossforthethreemonthsendedMarch31,2020of$70.1millionwashigherthanthelossof$8.0millionforthethreemonthsendedMarch31,2019,duemainlytorevaluationlossesrecordedonthewarrantliabilityanddeferredshareunit("DSU")liabilityof$55.2millionand$9.3millionrespectively,asaresultofahighercommonsharepriceatMarch31,2020thanatDecember31,2019.Intheprioryearperiod,recoveriesof$0.5millionand$0.4millionwererecordedrelating to the fair valuation of the warrant liability and DSUliability, respectively. The revaluation losses in the current period were partially offset by lowerclinicaltrial,manufacturing,intangibleassetsamortization,share-basedcompensation,andsalaryexpenses,aswellasalowernetforeigncurrencyloss.
Trillium's outstandingwarrants areanon-cashliability, andrevaluationlossesontheCompany's warrant liability balanceare of anon-cashnature. ThecurrentDSUplanallowsfor onlycash-settlement of DSUsthat are redeemedbydirectors whentheir service endswiththeCompany. Toconservetheuseof cashforoperations,theboardofdirectorshasapprovedthe2020OmnibusIncentivePlanthatprovidesforequitysettlementofDSUsandalldirectorshaveagreedtohavetheirexistingDSUsadministeredunderthetermsofthenewplan.Accordingly,alloutstandingDSUsissuedfordirectorcompensationwillbecomeequity-settledandclassifiedasequityinsteadofasaliability,subjecttoshareholderapprovalofthe2020OmnibusIncentivePlanattheAnnualGeneralandSpecialMeetingtobeheldonJune30,2020.
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Selected Consolidated Financial Information:
Consolidated statements of loss and comprehensive loss
Thispressreleasecontainsforward-lookingstatementswithinthemeaningofapplicableUnitedStatessecuritieslawsandforward-lookinginformationwithinthemeaning of Canadian securities laws (collectively, "forward-looking statements"). Forward-looking statements in this press release include statements about,without limitation, our expectations for the conversion of cash-settled DSUs to equity-settled DSUs, the timing of our expected information updates and ourstatementswithrespecttocontinuityplansandpreparednessmeasureswehaveimplementedinresponsetoCOVID-19anditsexpectedimpactonourbusiness,operations, cashbalanceandcashrunwayandclinical results. Withrespecttotheforward-lookingstatementscontainedinthispressrelease, Trilliumhasmadenumerous assumptions regarding, among other things: the effectiveness and timeliness of preclinical and clinical trials; and the completeness, accuracy andusefulness of the data. While Trilliumconsiders these assumptions to be reasonable, these assumptions are inherently subject to significant scientific, business,economic, competitive, market and social uncertainties and contingencies. Additionally, there are known and unknown risk factors that could cause Trillium'sactualresults,performanceorachievementstobemateriallydifferentfromanyfutureresults,performanceorachievementsexpressedorimpliedbytheforward-lookingstatementscontainedinthispressrelease.AdiscussionofrisksanduncertaintiesfacingTrilliumappearsinTrillium'sAnnualInformationFormfortheyearendedDecember31,2019filedwithCanadiansecuritiesauthoritiesandonForm40-FwiththeU.S.SecuritiesExchangeCommission,eachasupdatedbyTrillium'scontinuousdisclosurefilings,whichareavailableatwww.sedar.comandat www.sec.gov.Allforward-lookingstatementshereinarequalifiedintheirentiretybythiscautionarystatement,andTrilliumdisclaimsanyobligationtoreviseorupdateanysuchforward-lookingstatementsortopubliclyannouncetheresultofanyrevisionstoanyoftheforward-lookingstatementscontainedhereintoreflectfutureresults,eventsordevelopments,exceptasrequiredbylaw.
