|ATHENEX, INC. filed this Form 10-Q on 05/09/2019|
Research and development (“R&D”) expenses for the three months ended March 31, 2019 totaled $24.5 million, an increase of $3.2 million, or 15%, as compared to $21.3 million for the three months ended March 31, 2018. This was primarily due to an increase in licensing fees and preclinical development activities and included the following:
These increased costs were offset by a decrease of $2.5 million R&D costs due to the winding down of the two AK Phase 3 studies, and a decrease of $2.0 million other R&D costs related to API and 503B product development.
Selling, General, and Administrative Expenses
SG&A expenses for the three months ended March 31, 2019 totaled $15.2 million, an increase of $2.1 million, or 16%, as compared to $13.1 million for the three months ended March 31, 2018. This was primarily due to an increase of $2.6 million related to the pre-launch costs of our proprietary drugs, offset by a decrease of $0.5 million in general administrative expenses.
Interest (Expense) Income
Interest expense for the three months ended March 31, 2019 totaled $1.5 million, a change of $1.7 million as compared to $0.2 million interest income for the three months ended March 31, 2018. The interest expense in the current period was incurred from our long-term debt entered into during the third quarter of 2018.
Liquidity and Capital Resources
Since our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our R&D programs, SG&A costs associated with our operations, and the development of our specialty drug operations in our Commercial Platform and 503B operations and the investment we are making in our Commercial Platform in anticipation of commercializing our proprietary drugs. We incurred net losses of $36.2 million and $7.3 million for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, we had an accumulated deficit of $478.9 million. Our primary use of cash is to fund R&D costs and to fund our Commercial Platform. Our operating activities used $33.0 million and $12.7 million of cash during the three months ended March 31, 2019 and 2018, respectively. The increased cash outflow in our operating activities was primarily due to the increased R&D costs related to the funding requirements for our Commercial Platform and advancing our clinical programs, while in the same period last year, we had a significant inflow of cash resulting from an upfront license fee payment we received. We intend to continue to advance our various clinical programs which we expect will lead to increased cash outflow of R&D costs and increase our investments in commercialization activities for our proprietary drugs. In addition, we can provide no assurance that the funding requirements to diversify the product portfolio for specialty drug products in the Commercial Platform and 503B operations will decline in the future. Our principal sources of liquidity as of March 31, 2019 are cash, cash equivalents and short-term investments totaling of $71.3 million.
In July 2018, we closed a privately placed debt and equity financing deal with Perceptive for gross proceeds of $100.0 million and received aggregate net proceeds of $97.1 million, net of fees and offering expenses. We entered into a 5-year senior secured loan for $50.0 million of this financing and issued 2,679,528 shares of its common stock at a purchase price of $18.66 per share for the remaining $50.0 million. The loan matures on the fifth anniversary from the closing date and bears interest at a floating per annum rate equal to London Interbank Offering Rates (“LIBOR”) (with a floor of 2.0%) plus 9.0%. We are required to make monthly interest-only payments with a bullet payment of the principal at maturity. The loan agreement contains specified financial maintenance covenants. In connection with the loan agreement, we granted Perceptive a warrant for the purchase of 425,000 shares of common stock at a purchase price of $18.66 per share.
On May 7, 2019, we completed a private placement equity offering of 10 million shares of common stock. All shares were offered by us at a price of $10.00 per share to three institutional investors, namely Perceptive Advisors, Avoro Capital Advisors (formerly known as venBio Select Advisor), and OrbiMed. The aggregate net proceeds received by us from the offering were $99.8 million, net of offering expenses of approximately $0.2 million.
Based on the current operating plan, we expect that our cash and cash equivalents as of March 31, together with proceeds we have recently raised from the private placement and cash to be generated from our operating activities, will enable us to fund our operations through at least the next twelve months. We expect that our expenses will increase substantially as we continue to fund clinical and preclinical development of our research programs, pre-launch activities of our proprietary drugs and funding of our