Candel Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated results. Candel is a clinical-stage oncology biopharmaceutical company developing oncolytic viral immunotherapies; it has no approved products and has not generated product-sale revenue.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $31,000 | $31,000 | $63,000 | $63,000 |
| Research and development expense | $3.292 million | $1.795 million | $6.048 million | $3.417 million |
| General and administrative expense | $2.040 million | $855,000 | $3.972 million | $1.583 million |
| Net loss | $17.080 million | $2.876 million | $21.558 million | $4.648 million |
| Net loss per share, basic and diluted | $1.46 | $0.25 | $1.85 | $0.40 |
| Net cash used in operating activities | Not presented by quarter | $10.086 million | $4.150 million |
Revenue was recurring recognition of a prior license/service payment from Ventagen, a related party, rather than product sales. Six-month grant income was $796,000, including $464,000 from forgiveness of the Paycheck Protection Program loan. The $12.369 million increase in the fair value of warrant liabilities was a noncash expense and a major contributor to the reported net loss; it reflects, in part, warrant amendments and an increase in the estimated common-stock value.
At June 30, cash and cash equivalents were $24.316 million, versus $35.053 million at December 31, 2020; restricted cash was $423,000. Total assets were $30.744 million. Total liabilities were $24.859 million, including a $19.200 million warrant liability and $521,000 of long-term debt; the PPP loan had been forgiven. Stockholders’ deficit was $43.175 million. No meaningful operating margin is reported given the company’s pre-commercial status and minimal service revenue.
After quarter-end, the company completed its IPO and partial overallotment, issuing 9,887,994 shares at $8.00 per share for net proceeds of $71.5 million. Preferred stock converted into common stock at IPO closing. Management said cash, cash equivalents and short-term investments, together with IPO proceeds, were expected to fund operating and capital needs through the first quarter of 2023, subject to assumptions that could prove incorrect. The filing reports 28,689,842 common shares outstanding as of August 31, 2021.
Changes versus prior comparable periods
- Six-month net loss increased to $21.558 million from $4.648 million; operating expenses doubled to $10.020 million from $5.000 million.
- R&D expense rose by $2.631 million and G&A by $2.389 million, primarily reflecting higher employee-related costs, headcount, stock-based compensation, clinical development, manufacturing/regulatory work and professional fees.
- The warrant-liability fair-value expense rose to $12.369 million for the first half from $52,000 in the prior-year period, substantially amplifying the net loss.
- Operating cash use increased to $10.086 million from $4.150 million. Investing activities used $939,000 in 2021, compared with $19.005 million provided in 2020, mainly because the prior-year period included proceeds from sales of available-for-sale securities.
Outlook, commentary and key risks
- Management expected expenses to increase as it advanced CAN-2409 and CAN-3110, expanded clinical programs, developed manufacturing capacity and incurred public-company costs. The company expects continued operating losses and will need substantial funding beyond existing resources.
- At the time of the filing, management expected to complete enrollment in the Phase 3 CAN-2409 prostate-cancer trial in Q3 2021, with final data expected in 2024; it planned a potential registrational Phase 3 trial in high-grade glioma in the first half of 2022. Additional CAN-3110 biomarker results were expected in Q4 2021. These are forward-looking expectations, not guarantees.
- The FDA’s Special Protocol Assessment for the prostate trial does not assure approval. Clinical failure, adverse effects, regulatory delays, patient enrollment, manufacturing transition and reliance on third parties could delay or prevent development. The filing describes serious adverse events observed in earlier studies; outcomes from earlier trials may not predict later results.
- COVID-19 had caused some enrollment delays and clinical-site closures, but the company said these had not materially affected development timelines to date. Further effects on trials, suppliers, manufacturing, regulatory review and financing remained uncertain.
- The company reported no material legal proceedings and no material impact from inflation or a 10% interest-rate change. Management judged disclosure controls effective as of June 30, but the filing also describes material weaknesses identified in prior-year internal-control assessments and states remediation was ongoing and not assured.
Important facts for investors to verify
- Whether the stated cash runway through Q1 2023 remains reasonable in light of actual spending, clinical-trial costs and manufacturing-facility investment.
- Progress and results for CAN-2409’s Phase 3 prostate trial, including enrollment, protocol changes, endpoint acceptance and the anticipated 2024 readout; also verify subsequent plans for the glioma program and CAN-3110.
- How much future reported earnings may be affected by remeasurement of the Level 3 warrant liability, and the potential dilution and exercise terms of outstanding warrants.
- Whether manufacturing at the new facility and through contract manufacturers meets timeline, quality and supply requirements.
- Progress in remediating previously identified internal-control weaknesses, and any subsequent changes in cash, debt, share count or financing needs.