Longeveron Inc. annual report, FY2023

Longeveron Inc. 2023 Form 10-K Summary

Business context and reporting period

Longeveron is a clinical-stage biotechnology company developing Lomecel-B™, an allogeneic mesenchymal stem-cell therapy. Its primary programs target hypoplastic left heart syndrome (HLHS), Alzheimer’s disease and aging-related frailty. The filing covers the fiscal year ended December 31, 2023, with comparisons to the year ended December 31, 2022.

No product has received FDA approval for commercial sale.
The company’s only actively enrolling clinical trial at the filing date was the Phase 2b ELPIS II trial for HLHS, planned to enroll 38 patients and expected to complete enrollment in 2024.
The company completed the Phase 2a CLEAR MIND Alzheimer’s trial in September 2023 and reported favorable safety and selected efficacy results, but further development and partnership efforts remain necessary.
The company discontinued its Japan aging-related frailty trial in 2024 and intends to focus resources primarily on HLHS and Alzheimer’s disease.

Financial performance and key metrics

Metric	2023	2022	Change
Revenue	$0.7 million	$1.2 million	Down 42%
Gross profit	$0.2 million	$0.5 million	Down 56%
Gross margin	31.2%	40.7%	Down 9.5 percentage points
Operating expenses	$21.3 million	$18.5 million	Up 15%
Loss from operations	$21.0 million	$18.0 million	Loss increased $3.0 million
Net loss	$21.4 million	$18.8 million	Loss increased $2.6 million
Net loss attributable to common stockholders	$22.2 million	$18.8 million	Includes $0.8 million warrant-related deemed dividend
Basic and diluted loss per share	$1.02	$0.90	Loss per share increased
Net cash used in operating activities	$19.0 million	$14.0 million	Use increased $5.0 million

Revenue consisted primarily of $0.7 million from the Bahamas Registry Trial and $41,000 of grant revenue. The company also generates occasional contract development and manufacturing revenue, but the filing does not separately quantify that amount for 2023.

General and administrative expense increased 40% to $11.4 million, driven primarily by higher compensation and benefits, separation costs, legal and professional fees, public-company expenses and equity-based compensation.
Research and development expense decreased 3% to $9.1 million. Clinical trial costs were $4.3 million and Lomecel-B™ manufacturing supplies and costs were $1.2 million.
Selling and marketing expense decreased 25% to $0.8 million.
Other expense included approximately $0.3 million of realized marketable-security losses and $0.3 million of intangible-asset write-offs.

Liquidity, capital resources and obligations

At December 31, 2023, cash and cash equivalents were $4.9 million and marketable securities were $0.4 million, for approximately $5.4 million of cash and liquid securities.
Working capital was approximately $2.0 million, compared with total liabilities of $5.3 million and stockholders’ equity of $6.7 million.
The company had no credit facility or committed source of capital and reported no conventional debt. Operating lease liabilities totaled approximately $2.0 million, including $0.6 million classified as current.
Cash used in operations was $19.0 million. Investing cash flow was positive $8.2 million, mainly from sales of marketable securities, while financing cash flow was positive $5.3 million from 2023 offerings.
Net proceeds from the October and December 2023 offerings were approximately $3.4 million and $2.0 million, respectively. These offerings also issued substantial warrants that could create future dilution.
Management stated that existing cash would fund operations and capital expenditures only into the second quarter of 2024. The auditor included a going-concern explanatory paragraph, noting substantial doubt about the company’s ability to continue without additional financing.
As of December 31, 2023, the company had approximately $2.0 million of operating lease obligations and $1.5 million of CRO payment obligations.

Material changes versus 2022

Revenue declined by $0.5 million, primarily because of reduced grant activity and lower demand for the Bahamas Registry Trial.
Gross profit declined by $0.3 million and gross margin compressed to 31.2%.
Operating expenses increased by $2.7 million, led by higher general and administrative costs.
Net loss increased by $2.6 million despite lower research and development and selling and marketing expenses.
Operating cash use increased by $5.0 million, while the company liquidated most of its marketable securities to support operations.
Class A shares outstanding increased from approximately 6.1 million at year-end 2022 to 10.3 million at year-end 2023, before giving effect to additional potential warrant dilution.
The company raised capital through a rights offering and two registered direct/private offerings, but the rights offering generated no net proceeds after expenses.
The company recorded a $0.8 million deemed dividend related to a down-round adjustment of certain warrants.

Guidance, outlook, risks and unusual items

Management’s near-term strategy is to prioritize HLHS, continue analyzing and developing the Alzheimer’s program, pursue an Alzheimer’s partnership, reduce spending and seek additional financing.
ELPIS II was more than 50% enrolled, with enrollment expected to be completed in 2024; the filing does not provide a specific completion date.
The company has no established sales, marketing or distribution infrastructure and would need to build or outsource those capabilities if a product is approved.
FDA approval is uncertain. Lomecel-B™ has HLHS Rare Pediatric Disease, Orphan Drug and Fast Track designations, but these designations do not guarantee approval, a priority review voucher or market exclusivity.
Clinical results cited for HLHS and Alzheimer’s are early-stage or preliminary relative to regulatory approval requirements and may change after additional analysis, auditing or verification.
Key operating risks include continued losses, limited liquidity, potential dilution from equity and warrant financings, clinical-trial failure or delay, regulatory uncertainty for cell therapies, manufacturing scale-up, dependence on bone-marrow suppliers and third-party CROs, intellectual-property challenges, reimbursement uncertainty and potential Nasdaq delisting.
The company disclosed a securities lawsuit settlement of approximately $1.4 million, paid in 2023, and a separate former-employee matter settled for $75,000, with most remaining costs covered by insurance.
A reverse stock split was approved by stockholders in February 2024 at a ratio ranging from 1-for-5 to 1-for-15; the board had not yet selected the final ratio or effective date when the filing was issued.
As of February 23, 2024, the company reported a Class A closing bid price of $0.518 and warned that continued trading below $1.00 could jeopardize Nasdaq listing compliance.

Most important facts for an investor to verify

Whether the company completed subsequent financing sufficient to address the going-concern uncertainty and extend cash runway beyond the second quarter of 2024.
Current enrollment, data quality, safety and efficacy results from the ELPIS II HLHS trial.
Whether the CLEAR MIND Alzheimer’s findings are confirmed in additional analyses or larger controlled trials and whether a strategic partner is secured.
The final terms, timing and dilution impact of the approved reverse stock split and outstanding warrants.
Current Nasdaq listing compliance and any further stock-price or minimum-bid-price notices.
Updated cash balances, operating cash burn, grant availability and revenue from the Bahamas Registry Trial.
The status and enforceability of the company’s key University of Miami and JMHMD licenses, patent applications and related milestone or royalty obligations.