Filing summary
Entity mismatch: The supplied filing is Cerecor Inc.’s Form 10-Q for the quarter ended March 31, 2017; it is not an Avalo Therapeutics, Inc. filing. Verify the company and filing before relying on this summary.
Business context and reporting period
Cerecor is a clinical-stage biopharmaceutical company developing candidates for neurological and psychiatric disorders. It has no approved products and reports no product-sales revenue. This unaudited filing covers the three months ended March 31, 2017, with comparisons to the same 2016 quarter.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / prior balance |
|---|---|---|
| Grant revenue | $384,206 | $0 |
| Research and development expense | $953,071 | $2,293,273 |
| General and administrative expense | $1,330,264 | $2,649,093 |
| Operating loss | $1,899,129 | $4,942,366 |
| Net loss | $1,960,638 | $5,140,013 |
| Basic and diluted loss per share | $0.19 | $0.59 |
| Cash and cash equivalents at period end | $3,001,553 | $5,127,958 at Dec. 31, 2016 |
| Net cash used in operating activities | $2,245,563 | $3,706,560 |
| Term debt, net of discount | $1,492,356 | $2,353,667 at Dec. 31, 2016 |
Cash and cash equivalents fell by $2.13 million during the quarter. Net working capital was $0.7 million. Total liabilities were $3.99 million, including $1.25 million of license obligations; stockholders’ equity was negative $425,758. The term loan carried an 8.45% rate and was due to mature in August 2017. The filing reports no product revenue; Q1 grant revenue related to an NIAAA award supporting CERC-501 research.
Changes versus the prior comparable period
Revenue increased from zero because of grant income. Net loss narrowed by about $3.18 million, while R&D expense declined by about $1.34 million, primarily following completion of Phase 2 studies for CERC-301 and CERC-501. G&A expense declined by about $1.32 million, including lower stock-based compensation, professional fees, and personnel costs. Operating cash use improved by about $1.46 million. The company also reduced term debt by approximately $861,000 during the quarter.
Outlook, risks, and unusual items
- Management said available cash, including proceeds from an April 2017 financing, was expected to fund operating and capital requirements through the end of February 2018. The filing nevertheless states that substantial doubt exists about the company’s ability to continue as a going concern and that further financing is required.
- After quarter end, Armistice invested $5.0 million gross; Cerecor reported $4.65 million net proceeds. The securities included common stock, convertible preferred stock and warrants. Preferred conversion and warrant exercise depended on shareholder approval, and the financing could materially dilute existing holders.
- The company said the Armistice financing addressed Nasdaq’s stockholders’ equity requirement as of the filing date, but warned that continued compliance was not assured and delisting could result if requirements were not met.
- Management planned a Phase 2/3 CERC-501 study for major depressive disorder and Phase 1 development of CERC-611, but both depended on additional funding. The company said it had no capital to undertake new company-funded trials at the time; three CERC-501 trials were externally funded.
- Cerecor was reviewing strategic alternatives with SunTrust, including a possible acquisition, merger or business combination; it had not selected a transaction and gave no assurance one would occur.
- As of March 31, 2017, the company had up to approximately $1.0 million of future contractual obligations to clinical research organizations and other external service providers. It reported no material legal proceedings and no material change to the risk factors in its prior annual report.
Most important facts to verify
- Confirm the issuer: this source identifies Cerecor Inc., not Avalo Therapeutics, Inc.
- Check the April Armistice financing’s closing terms, net proceeds, shareholder-approval conditions, and potential dilution.
- Verify current cash runway, additional financing availability, and the company’s going-concern and Nasdaq listing status.
- Confirm the term loan’s repayment or refinancing status given its August 2017 maturity.
- Check progress and funding for the CERC-501 and CERC-611 programs and any outcome of the strategic-alternatives review.