Artelo Biosciences, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022; filed August 9, 2022. Artelo is a clinical-stage biopharmaceutical company developing therapeutics targeting lipid-signaling pathways, including the endocannabinoid system. It has no approved products and has generated no revenue.
Financial performance and liquidity
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $1.056 million | $1.520 million | $0.970 million / $1.277 million |
| General and administrative expense | $1.415 million | $2.897 million | $1.284 million / $2.673 million |
| Total operating expenses | $2.471 million | $4.417 million | $2.254 million / $3.950 million |
| Net loss | $2.449 million | $4.414 million | $2.252 million / $3.947 million |
| Basic and diluted loss per share | $0.06 | $0.10 | $0.10 / $0.18 |
| Cash used in operating activities | Not separately stated | $4.019 million | $3.344 million |
Amounts are USD; financial statement figures are in thousands unless stated otherwise. The comparable-period columns show Q2 2021 / six months 2021. As the company had no revenue, gross margin is not applicable. Q2 net loss increased $197,000 year over year; six-month net loss increased $467,000, mainly reflecting higher G&A and R&D spending. Management attributed expense increases principally to consulting, conferences, legal and insurance costs, and payroll and subcontractor costs related to ART27.13 trials.
At June 30, 2022, cash and cash equivalents were $12.122 million, marketable securities totaled $9.2 million, and working capital was $21.755 million. Total assets were $24.405 million, total liabilities $567,000, and stockholders’ equity $23.838 million. No borrowing debt is reported; liabilities include $85,000 of operating lease obligations. Cash and cash equivalents decreased $40,000 from year-end 2021. Investing activities provided $4.242 million, principally from maturities or dispositions of marketable securities; financing activities used $134,000 for stock issuance costs.
Material changes and capital
- Six-month operating cash use rose $675,000 year over year, to $4.019 million. Management expects operating losses and cash use to increase as development advances.
- In May 2022, Artelo entered a 36-month equity purchase facility with Lincoln Park for up to $20 million of common stock. No shares had been sold under the facility as of June 30; the company issued 292,968 commitment shares and recorded $134,000 of deferred offering costs.
- Management said existing cash and marketable securities were expected to fund planned operations through the end of 2023. The company nevertheless remains dependent on future financing; additional equity issuance could dilute shareholders.
- Common shares outstanding were 42,593,981 as of August 8, 2022. Stock-based compensation for the six-month period was $1.243 million, including $1.1 million attributed to related parties.
Outlook, operations, and risks
- ART27.13: In a Phase 1b/2a study for cancer-related anorexia. After completing enrollment in the first three dosing cohorts, the company elected to add a fourth, higher-dose cohort before selecting a dose for Phase 2. It anticipated starting Phase 2 enrollment before year-end 2022; COVID-19 had caused minor delays.
- ART26.12: A preclinical FABP5 inhibitor program, with chemotherapy-induced peripheral neuropathy prioritized as the initial indication. First-in-human studies were anticipated in late 2023, or more likely 2024, subject to study, supply, pandemic, and regulatory factors.
- ART12.11: A preclinical cannabidiol cocrystal program. No specific development timetable was provided.
- Material uncertainties include clinical-trial enrollment and outcomes, regulatory approvals, third-party research and manufacturing capacity, supply-chain disruption, COVID-19 and geopolitical impacts, intellectual-property and licensing obligations, and the need for additional capital. The company also identified potential increases in development costs if UK R&D tax credits are reduced or discontinued.
- Nasdaq had notified the company of a minimum-bid-price deficiency. The filing stated the second compliance period ran through September 12, 2022, and the company had not yet received confirmation that it had regained compliance.
- The company reported no legal proceedings considered likely to have a material adverse effect. Management concluded disclosure controls and procedures were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether ART27.13 Phase 2 enrollment began on the anticipated schedule and what clinical data or dose-selection updates followed.
- Actual cash burn, updated liquidity runway, and whether the Lincoln Park facility was used, including potential dilution.
- Progress and timing of ART26.12 regulatory-enabling studies, and any changes to the projected first-in-human timetable.
- Whether Artelo regained Nasdaq minimum-bid-price compliance by the stated deadline.
- Potential clinical-trial, manufacturing, or cost effects from supply-chain conditions and UK R&D tax-credit changes.