Pasithea Therapeutics Corp. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; unaudited consolidated financial statements. The company is a pre-revenue biotechnology business developing treatments for CNS disorders and RASopathies. Its lead candidate, PAS-004, is a MEK inhibitor; three other programs are at the discovery stage. The former Clinics segment was discontinued and its remaining Los Angeles assets sold during Q2.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Continuing-operations revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $2.03 million | None | $3.12 million | None |
| Selling, general and administrative expense | $1.80 million | $2.61 million | $3.92 million | $4.69 million |
| Loss from continuing operations | $3.60 million | $2.19 million | $6.86 million | $3.48 million |
| Net loss, including discontinued operations | $3.76 million | $2.66 million | $7.30 million | $4.23 million |
- No revenue or gross margin was reported from continuing operations. Basic and diluted loss per share was $0.14 for Q2 2023 and $0.26 for the first half.
- Q2 operating loss widened by $1.22 million year over year as R&D began, partly offset by lower SG&A. First-half net loss increased by $3.07 million; lower warrant-related gains versus 2022 contributed to the deterioration.
- Cash and cash equivalents were $26.65 million at June 30, down $6.44 million from year-end. First-half cash used in continuing operating activities was $6.28 million; working capital was $25.81 million.
- Total liabilities were $2.56 million, including a $133,000 insurance-financing note payable and $426,000 of operating lease liabilities. No credit facility or committed capital sources were reported.
- No operating margin is meaningful because continuing operations had no revenue. The filing does not provide a clear product-revenue outlook.
Developments, outlook and risks
- The company announced completion of GMP-compliant manufacturing of PAS-004 Phase 1 clinical supply on June 29, 2023. It anticipates beginning a first-in-human Phase 1 trial after regulatory submission acceptance; timing remains subject to regulatory review.
- Management expects R&D expense to increase through 2023, particularly for PAS-004 manufacturing, regulatory work and clinical development; SG&A is expected to remain relatively flat. Inflation is increasing personnel and outside-service costs.
- Management believes available working capital will fund operations for 12 months from the financial statements’ issuance date, including on a pro forma basis for the announced tender offer. The company also says it will need significant additional funding; financing may not be available on acceptable terms or at all.
- In July, the board authorized a $4.0 million tender offer for up to approximately 5.7 million shares at $0.70 per share. The offer launched August 9 and was expected to expire September 8, 2023, subject to its terms.
- The Los Angeles Clinics assets were sold for $150,000 gross consideration, including $122,500 receivable in installments; the filing recorded a $65,048 gain. Clinics operations had no revenue in the first half of 2023 and generated a $437,015 net loss.
- Key risks include clinical and regulatory uncertainty, continuing losses and reliance on future financing, dependence on third parties, intellectual-property risks, and potential cost increases. The filing reported no material legal proceedings or material changes to previously disclosed risk factors.
Important facts for investors to verify
- Regulatory submission status and timing, and the requirements for PAS-004 Phase 1 trial initiation.
- Actual cash burn, remaining runway, and whether additional financing or collaborations will be required.
- Tender-offer results and the effect of any repurchases on cash, shares outstanding and development funding.
- Progress, costs and clinical readiness of PAS-004 and the company’s discovery-stage programs.
- Collection of the $122,500 sale receivable and any further costs or obligations related to the Clinics disposal.