Citius Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended March 31, 2021 (quarter ended March 31; filed May 13, 2021). The company is a development-stage specialty pharmaceutical business and reported no revenue.
Financial position and results
| Metric | Three months ended March 31, 2021 | Six months ended March 31, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.55 million | $7.74 million |
| General and administrative expense | $2.29 million | $3.98 million |
| Total operating expenses | $4.19 million | $12.34 million |
| Net loss | $4.12 million | $12.27 million |
| Net loss per share, basic and diluted | $0.04 | $0.16 |
| Cash used in operating activities | Not separately reported | $13.84 million |
For the six months, cash and cash equivalents were $103.70 million, compared with $13.86 million at September 30, 2020. Working capital was $101.99 million; total liabilities were $8.90 million. Cash increased by $89.84 million, principally from $103.67 million of financing proceeds. The company reported related-party notes payable of $172,970, a $164,583 Paycheck Protection Program loan, and operating lease liabilities. Profit margins are not meaningful because the company had no revenue.
Changes versus comparable periods
- Quarterly net loss narrowed by $302,537 year over year, mainly as R&D expense fell $464,599, partly offset by higher stock-based compensation.
- Six-month net loss increased by $3.52 million year over year. R&D expense rose $3.06 million, including $5.00 million paid for the NoveCite license; the prior-year period included $110,207 of FDA refund income.
- Cash and equity increased substantially after January and February 2021 equity offerings and warrant exercises. The company issued 66.29 million shares in the two offerings; common shares outstanding rose from 55.58 million at September 30, 2020 to 134.70 million at March 31, 2021.
Business, outlook and risks
The company is developing Mino-Lok for catheter-related bloodstream infections, Mino-Wrap for breast-implant-related infections, Halo-Lido for hemorrhoid symptoms, and, through its 75%-owned NoveCite subsidiary, a cellular therapy for acute respiratory distress syndrome. Six-month R&D included $5.38 million for the ARDS program. Management expects R&D spending to increase during fiscal 2021 as it advances the Mino-Lok Phase 3 trial and develops the other candidates.
Management estimates available cash will fund operations through March 2023. The company has no operating revenue to date and says continued operations beyond that point depend on regulatory approval and commercial revenue, or additional financing, strategic relationships, or product licensing. It gives no assurance these will be achieved or available on acceptable terms. Key risks include clinical and regulatory outcomes, commercialization, financing, personnel, suppliers, and partners.
Potential dilution is significant: 51.57 million warrants were outstanding at March 31, 2021, in addition to 4.62 million Citius stock options. A May 2021 stockholder meeting was planned to consider increasing authorized common shares from 200 million to 400 million and approving a new incentive plan. Management reported disclosure controls were effective and no material change in internal control during the quarter. No legal proceedings were reported.
Investor facts to verify
- Clinical-trial progress, timing, costs, and regulatory prospects for Mino-Lok, Mino-Wrap, Halo-Lido, and the NoveCite ARDS candidate.
- The assumptions behind the stated cash runway through March 2023, particularly given six-month operating cash use of $13.84 million and expected higher R&D spending.
- Potential dilution from outstanding warrants and options, and the outcome of the proposed increase in authorized shares.
- Future milestone, royalty, and sublicense obligations, including up to $51 million in NoveCite development and regulatory milestones.
- Whether the company can obtain approvals and generate commercial revenue or secure additional capital after its estimated runway.