BriaCell Therapeutics Corp. — Interim / Quarterly Report 2024

Mar 18, 2024

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “our,” “us” or “we” refer to BriaCell Therapeutics Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Introduction

This Management’s Discussion and Analysis (“MD&A”) should be read together with other information, including our unaudited condensed interim consolidated financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report (the “Condensed Consolidated Financial Statements”), our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended July 31, 2023 (the “Annual Report”) and Part I, Item 1A, Risk Factors, of the Annual Report. This MD&A provides additional information on our business, recent developments, financial condition, cash flows and results of operations, and is organized as follows:

• Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends.

• Part 2 - Results of Operations. This section provides an analysis of our results of operations for the first half and second quarter of fiscal 2024 in comparison to the first half and second quarter of fiscal 2023.

• Part 3 - Financial Liquidity and Capital Resources. This section provides an analysis of our cash flows and outstanding debt and commitments. Included in this analysis is a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments.

We prepare and report our unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP. Our unaudited Condensed Consolidated Financial Statements, and the financial information contained herein, are reported in U.S Dollars.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

Overview

BriaCell Therapeutics Corp. (the “Company”), is a clinical-stage biotechnology company that is developing novel immunotherapies to transform cancer care. Immunotherapies have come to the forefront in the fight against cancer as they harness the body’s own immune system to recognize and destroy cancer cells. The Company is currently advancing its Bria-IMT™ targeted immunotherapy in combination with an immune check point inhibitor (Retifanlimab) in a pivotal[1] Phase 3 study in advanced metastatic breast cancer. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. BriaCell reported benchmark-beating patient survival and clinical benefit in advanced metastatic breast cancer with median overall survival of 13.4 months in BriaCell’s advanced metastatic breast cancer patients vs. 6.7-9.8 months for similar patients reported in the literature in its Phase 2 study of Bria-IMT™ combination study with retifanlimab at the 2023 San Antonio Breast Cancer Symposium. A completed Bria-

IMT™ Phase 1 combination study with retifanlimab (an anti-PD1 antibody manufactured by Incyte) confirmed tolerability and early-stage efficacy. BriaCell is also developing a personalized off-the-shelf immunotherapy, Bria-OTS™, which provides a platform technology to develop personalized off-the-shelf immunotherapies for numerous types of cancer, and a soluble CD80 protein therapeutic which acts both as a stimulator of the immune system as well as an immune checkpoint inhibitor.

1“Pivotal” is an industry term referring to a Phase 3 clinical study intended to show and confirm the safety and efficacy of a treatment.

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Recent Developments

On August 31, 2023, the Company closed the previously announced plan of arrangement spinout transaction (the “Arrangement”) pursuant to which certain pipeline assets of the Company, including Bria-TILsRx™ and protein kinase C delta (PKCδ) inhibitors for multiple indications including cancer (the “BriaPro Assets”), were spun-out to BriaPro Therapeutics Corp. (“BriaPro”), resulting in a 2/3rd owned subsidiary of the Company with the remaining 1/3rd held by BriaCell shareholders (“BriaCell Shareholders”).

Pursuant to the terms of the Arrangement, BriaPro has acquired the entire right and interest in and to the BriaPro Assets in consideration for the issuance by BriaPro to the Company of BriaPro common shares. Under the terms of the Arrangement, for each BriaCell share held immediately prior to closing, BriaCell Shareholders receive one (1) common share of BriaPro, and one (1) new common share of BriaCell (retiring their old share) having the same terms and characteristics as the existing BriaCell common shares. The Company will remain listed on the NASDAQ Stock Market and Toronto Stock Exchange, and BriaPro is an unlisted reporting issuer in Canada.

As noted above, immediately following the closing of the Arrangement, the Company controlled 2/3rd of the BriaPro common shares representing approximately 66.6% of the issued and outstanding common shares of BriaPro As a result of the Arrangement, there were approximately 47,945,178 BriaPro common shares issued and outstanding immediately following consummation of the Arrangement. The Corporation now beneficially owns or controls approximately 31,963,452 BriaPro common shares, representing 2/3rd of the issued and outstanding BriaPro common shares.

On October 3, 2023, BriaCell initiated its pivotal Phase 3 Study of Bria-IMT™ in advanced metastatic breast Cancer. The study will evaluate the efficacy and safety of the Bria-IMT™ combination regimen with an immune check point inhibitor (Retifanlimab) in patients who have failed at least two approved therapies for the disease. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. FDA has agreed that improvement in overall survival in the Bria-IMT™ combination arm as compared to the physician’s choice of treatment arm will be the primary endpoint of the study. The study will enroll 177 patients in the Bria-IMT™ combination therapy arm and 177 patients in the treatment of physician’s choice arm. To gather additional information on the BriaIMT™ regimen alone, 50 patients will be enrolled in this regimen and will be eligible for combination therapy following their initial post treatment evaluation. BriaCell expects frequent and responsive FDA communication under its Fast Track status during the pivotal Phase 3 study. The successful completion of the pivotal Phase 3 study would allow BriaCell to subsequently submit a Biologics License Application and accelerate the path to commercialization.

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Results of Operations for the Three Months Ended January 31, 2024 and 2023

	Three months ended January 31, 2024 2023 (Unaudited) (Unaudited)	Three months ended January 31, 2024 2023 (Unaudited) (Unaudited)
	2024 (Unaudited)
Operating Expenses:
Research and development expenses	$ 8,257,455	$ 3,053,357
General and administrative expenses	1,571,991	1,432,966
Total operating expenses	9,829,446	4,486,323
Operating loss	(9,829,446)	(4,486,323)
Financial expenses, net	(1,486,119)	(7,395,439)
Share of loss on equity investments	(18,345)	-
Net loss for the period	$ (11,333,910)	$ (11,881,762)
Net loss attributable to non-controlling interest	(39,307)	-
Net loss for the period attributable to BriaCell	(11,294,603)	(11,881,762)
Net loss per share attributable to BriaCell – basic and diluted	$ (0.71)	$ (0.77)

Research and Development Costs

Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials.

The following is a breakdown of our research and development costs by project:

	Three months ended January31, 2024 2023	Three months ended January31, 2024 2023
	2024
Clinical trials	$ 4,359,850	$ 1,438,231
Pre-clinical projects	2,992,990	745,236
Chemical, Manufacturing and Control Costs (“CMC Costs”)	420,112	331,590
Other	484,503	538,300
	$ 8,257,455	$ 3,053,357

Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. a longer than expected overall survival). Additionally, our costs increased significantly compared with the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™.

Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including BriaOTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2024 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80).

Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. Other costs increased in 2024 as we investigated additional potential preclinical projects.

The following is a breakdown of our research and development costs by nature of expenses:

Three months ended January 31,

	2024	2023
Clinical trial sites and investigational drug costs	$ 6,200,980	$ 1,288,577
Wages and salaries	1,401,679	1,282,441
Laboratory Rent	108,000	48,000
Supplies	312,543	207,061
Professional fees	-	2,187
Share-based compensation	234,253	225,091
	$ 8,257,455	$ 3,053,357

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For the three-month period ended January 31, 2024, total research costs amounted to $8,257,455 as compared to $3,053,357 for the three-month period ended January 31, 2023. The rise in these costs is primarily attributed to the continued expansion of the Company’s clinical trials, specifically our Bria-IMT™ trial. Clinical trials and investigational drug costs increased from $1,288,577 in 2023 to $6,200,980 in 2024. Laboratory costs increase during 2024 as well, including the hiring of additional lab employees which increased from $1,282,441 in 2023 to $1,401,679 in 2024 and increased supplies from $207,061 in 2023 to $312,543 in 2024. Finally, the increase in share-based compensation (noncash) expenses, from $225,091 in 2023 to $234,253 in 2024 also contributed to the increase in research and development expenses.

General and Administrative Expenses

For the three-month period ended January 31, 2024, general and administrative expenses amounted to $1,571,991 as compared to $1,432,966 for the three-month period ended January 31, 2023. The increase relates primarily to shareholder communication expenses and in share-based compensation (non-cash) expense, offset by a decrease in insurance expenses and professional fees.

Financial income (expenses), net

For the three-month period ended January 31, 2024, financial expense, net, amounted to $1,486,119 as compared to $7,395,439 for the three-month period ended January 31, 2023. The large difference is due to the change in value of the Company’s warrant liability which amounted to a loss of $1,567,746 in the three-month period ending January 31, 2024, and a loss of $7,629,502 in the three-month period ending January 31, 2023.

Loss for the period

The Company reported a loss for the three-month period ended January 31, 2024, of $11,294,603, as compared to a loss of $11,881,762 for the three-month period ended January 31, 2023. The loss in 2024 is due to a significant increase in operational spending. The loss in the prior period is primarily due to the large increase in fair value of the warrant liability.

Results of Operations for the Six Months Ended January 31, 2024 and 2023

	Six months ended January 31, 2024 2023 (Unaudited) (Unaudited)	Six months ended January 31, 2024 2023 (Unaudited) (Unaudited)
	2024 (Unaudited)
Operating Expenses:
Research and development expenses	$ 15,114,712	$ 6,308,572
General and administrative expenses	3,217,762	3,580,902
Total operating expenses	18,332,474	9,889,474
Operating loss	(18,332,474)	(9,889,474)
Financial expenses, net	12,975,781	(3,098,829)
Share of loss on equity investments	(18,345)	-
Net loss for the period	$ (5,375,038)	(12,988,303)
Net loss attributable to non-controlling interest	(81,978)	-
Net loss for the period attributable to BriaCell	(5,293,060)	(12,988,303)
Net loss per share attributable to BriaCell – basic and diluted	$ (0.33)	$ (0.84)
Weighted average number of shares used in computing net basic earnings per share of common stock	15,981,726	15,518,018
Weighted average number of shares used in computing net diluted earnings per share of common stock	15,981,726	15,518,018

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Research and Development Costs

Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) Clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials.

The following is a breakdown of our research and development costs by project:

	Six months ended January31, 2024 2023	Six months ended January31, 2024 2023
	2024
Clinical trials	$ 7,987,140	$ 3,041,327
Pre-clinical projects	5,061,969	1,608,402
CMC Costs	967,309	741,608
Other	1,098,294	917,235
	$ 15,114,712	$ 6,308,572

Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. longer than expected overall survival). Additionally, our costs increased significantly compared with those in the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™.

Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including BriaOTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2023 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80).

CMC Costs include the manufacturing of Bria-IMT™ and Bria-OTS™. CMC Costs increased in 2024 to support the pivotal Phase 3 study, and the upcoming clinical studies of Bria-OTS™.

Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. Other costs increased in 2024 as we investigated additional potential preclinical projects.

The following is a breakdown of our research and development costs by nature of expenses:

	Six months ended January 31, 2024 2023	Six months ended January 31, 2024 2023
	2024
Clinical trial sites and Investigational drug costs	$ 11,598,418	$ 3,330,516
Wages and salaries	2,422,404	1,998,985
Laboratory Rent	196,480	96,000
Supplies	401,566	300,425
Professional fees	3,782	7,299
Share-based compensation	492,062	575,347
	$ 15,114,712	$ 6,308,572

For the six-month period ending January 31, 2024, research costs amounted to $15,114,712, a significant increase from the $6,308,572 incurred during the same period in 2023. This upturn was primarily fuelled by the expansion of the Company’s Phase 2 trial, and initiation of the Phase 3 trial of the Bria-IMT™ regimen, and heightened costs associated with clinical trials and investigational drugs, surging from $3,330,516 in 2023 to $11,598,418 in 2024. Concurrently, laboratory costs increased due to the recruitment of additional employees, growing from $96,000 to $196,480. Notably, non-cash share-based compensation expenses decreased from $575,347 in 2023 to $492,062 in 2024, mitigating some of the overall increase in research and development expenses.

General and Administrative Expenses

For the six-month period ended January 31, 2024, general and administrative expenses amounted to $3,217,762 as compared to $3,580,902 for the six-month period ended January 31, 2023. This reduction is mainly attributed to a decrease in non-cash share-based compensation expenses, which declined from $803,438 in 2023 to $541,909 in 2024 and insurance expenses which declined from $847,241 in 2023 to $583,997 in 2024.

Financial income (expenses), net

For the six-month period ending January 31, 2024, net financial income amounted to $12,975,781, a significant increase from the loss of $3,098,829 recorded in the same period of 2023. This substantial difference is primarily attributed to the change in the value of the Company’s warrant liability, which is directly affected by the shortened life of the warrants and decrease in share price, resulting in a gain of $12,714,331 for the six-month period ended January 31, 2024, compared to a loss of $3,511,712 in the six-month period ended January 31, 2023.

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Loss for the period

The Company reported a loss for the period ended January 31, 2024, of $5,375,038, as compared to $12,988,303 for the period ended January 31, 2023. The reduced loss in 2024 was primarily due to a significant increase in operational spending, offset by a large gain resulting from the decrease in the fair value of the warrant liability. In contrast, the larger loss in the prior period was primarily due to higher operational spending and an increase in the value of the Company’s warrant liability.

Going Concern Uncertainty

The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future.

As of January 31, 2024, the Company has total assets of $12,231,047 (July 31, 2023 - $27,163,577) and a positive working capital balance of $7,817,634 (July 31, 2023 -$25,147,050). The Company had negative cash flows from operating activities during the six-month period ended January 31, 2024 of $15,006,564.

The Company is planning to finance its research and developmental activities from its existing and future working capital resources and will continue to evaluate additional sources of capital and financing. The uncertainty of the Company’s ability to raise such financial capital casts significant doubt on the Company’s ability to continue as a going concern.

Liquidity and Capital Resources

As of January 31, 2024, the Company has working capital of $7,817,634 (July 31, 2023 - $25,147,050) and an accumulated deficit of $85,945,291 (July 31, 2023 - $80,652,231).

As of January 31, 2024, the Company’s capital resources consist primarily of cash and cash equivalents, comprising mostly of cash on deposit with banks, investments in money market funds, investments in U.S. government securities, U.S. government agency securities, and investment grade corporate debt securities. Our investment policy and strategy are focused on preservation of capital and supporting our liquidity requirements.

Historically, the Company has financed its operation through private and public placement of equity securities, as well as debt financing. The Company’s ability to fund its longer-term cash requirements is subject to multiple risks, many of which are beyond its control. The Company intends to raise additional capital, either through debt or equity financings in order to achieve its business plan objectives. Management believes that it can be successful in obtaining additional capital; however, there can be no assurance that the Company will be able to do so. There is no assurance that any funds raised will be sufficient to enable the Company to attain profitable operations or continue as a going concern. To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

During the six-month period ended January 31, 2024, the Company’s overall position of cash and cash equivalents decreased by $15,006,563 from the six-month period ended January 31, 2023 (including effects of foreign exchange). This decrease in cash can be attributed to the following:

The Company’s net cash used in operating activities during the six-month period ended January 31, 2024, was $15,006,564, as compared to $7,494,122 for the six-month period ended January 31, 2023.

Cash used in financing activities for the six-month period ended January 31, 2024, was nil, as compared to $47,294 for the six-month period ended January 31, 2023.

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Off-Balance Sheet Arrangements

None.

Tabular Disclosure of Contractual Obligations

None.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in the MD&A section in our Annual Report.

New Accounting Policies Adopted

The Company did not adopt any new accounting policies during the six-month period ended January 31, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s financial instruments consist of cash and cash equivalents, investments, trade payable , and accrued expenses and other payables. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.

Management understands that the Company is exposed to financial risk arising from fluctuations in foreign exchange rates and the degree of volatility of these rates as a portion of the Company’s transactions occur in Canadian Dollars (mainly costs relating to being a public company in Canada), and the Company’s functional and presentation currency is the US dollar. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management process. The overall objectives of the Board are to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility.

The type of risk exposure and the way in which such exposure is managed is as follows:

Credit Risk

The Company has no significant concentration of credit risk arising from operations. Management believes that the credit risk concentration with respect to financial instruments is remote.

Liquidity Risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they come due. As of January 31, 2024, the Company has total assets of $12,231,047 (July 31, 2023 - $27,163,577 ) and a positive working capital balance of $7,817,634 (July 31, 2023 –$25,147,050).

Market Risk

Interest rate risk

Interest Rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. The Company does not believe it is exposed to material interest rate risk as it has no interest-bearing debt.

Price risk

As the Company has no revenues, price risk is remote.

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Exchange risk

The Company is exposed to foreign exchange risk as a portion of the Company’s transactions occur in Canadian Dollars (mainly costs relating to being a public company in Canada) and, therefore, the Company is exposed to foreign currency risk at the end of the reporting period through its Canadian denominated trade payable and cash. As of January 31, 2024, a 5% depreciation or appreciation of the Canadian dollar against the US dollar would not have a material effect on the in total loss and comprehensive loss.

Fair Values

The carrying values of cash and cash equivalents, trade payable, and accrued expenses and other payables approximate their fair values due to their short terms to maturity.

Cash and cash equivalents are valued using quoted market prices in active markets. The fair value of the warrant liability is determined based on the nature of the warrant. For publicly traded warrants we use the quoted market price and for all other warrants we use the Black-Scholes pricing model.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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