Lantern Pharma Inc. — Q2 2022 Form 10-Q Summary
Business Context and Reporting Period
Lantern Pharma is a clinical-stage biopharmaceutical company using its RADR® artificial intelligence, machine-learning and genomic-data platform to develop targeted oncology therapies. The portfolio includes LP-100 and LP-300 in Phase II development, LP-184 and LP-284 in preclinical or IND-enabling work, and an antibody-drug conjugate program.
This unaudited report covers the three and six months ended June 30, 2022. The company had 10,830,947 common shares outstanding as of August 1, 2022 and has not generated operating revenue other than limited research-grant revenue historically.
Financial Position and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $4.49 million, or $0.41 per share | $8.61 million, or $0.79 per share |
| Operating expenses | $4.39 million | $8.46 million |
| Research and development | $2.99 million | $5.65 million |
| General and administrative | $1.41 million | $2.81 million |
| Operating loss | $4.39 million | $8.46 million |
| Operating cash flow | Not separately provided | $(6.06) million |
Margins are not meaningful because the company reported no revenue. At June 30, 2022, cash and cash equivalents were $43.36 million, marketable securities were $18.79 million, and total current assets were $65.66 million. Working capital was approximately $60.36 million. Total liabilities were $5.30 million, consisting primarily of accounts payable and accrued expenses and operating lease liabilities. The company reported no long-term debt; its $108,500 PPP loan was fully forgiven in 2021.
Cash, cash equivalents and restricted cash declined $8.62 million during the first six months of 2022 to $43.90 million. Management stated that existing cash and anticipated expenditures should fund operating and capital requirements for at least 12 months from the filing date, but expects to require substantial additional funding to complete clinical trials.
Material Changes Versus the Prior Comparable Period
- Three-month net loss increased to $4.49 million from $2.32 million; six-month net loss increased to $8.61 million from $4.77 million.
- Three-month research and development expense increased 157% to $2.99 million, primarily due to higher product-candidate manufacturing and research-study costs. Six-month R&D expense increased 131% to $5.65 million.
- Six-month general and administrative expense increased 13% to $2.81 million, reflecting higher professional fees, payroll, travel, rent and administrative costs.
- Six-month operating cash use increased to $6.06 million from $3.87 million.
- Investing cash use decreased to $349,000 from $18.29 million because the prior-year period included substantially larger purchases of marketable securities.
- Financing cash flow changed from $64.29 million of inflow in the prior-year period, primarily from the January 2021 equity offering, to $2.18 million of outflow in 2022, primarily due to share repurchases.
- The company repurchased 353,667 shares for approximately $2.48 million during the first six months; the repurchase program terminated on July 31, 2022.
- Shares outstanding declined from 11,088,835 at December 31, 2021 to 10,830,947 at June 30, 2022, while 95,779 shares were issued from warrant exercises.
Outlook, Commentary, Risks and Unusual Items
- Management expects R&D spending and operating losses to continue increasing as LP-300 progresses through Phase II, LP-184 and LP-284 advance toward clinical testing, and LP-100 development continues.
- LP-300’s Phase II Harmonic trial was launched for never-smokers with advanced non-small cell lung cancer. LP-100 is in a Phase II trial for metastatic castration-resistant prostate cancer.
- COVID-19, supply-chain constraints and staffing shortages have delayed manufacturing, research activities, LP-300 trial launch activities, LP-184 IND-enabling work and LP-100 enrollment.
- The company expects additional funding will be needed. Future equity financing could dilute existing stockholders; debt financing could create fixed obligations and restrictive covenants. Failure to obtain funding could delay, reduce or discontinue development programs.
- Marketable securities had $806,802 of unrealized losses at June 30, 2022. Management did not consider these losses to represent credit losses, but realized losses on securities and foreign-currency losses contributed to other expense.
- Research, strategic-alliance and license agreements generated approximately $3.79 million of R&D expense during the first six months, with approximately $3.16 million accrued and payable at June 30, 2022. Additional milestone, manufacturing, clinical-trial and service-provider payments are expected.
- The company released approximately $459,000 from escrow to Allarity during the first six months in connection with LP-100 drug-stock recertification. Up to an additional $500,000 remained subject to enrollment-related milestones.
- On July 21, 2022, the company received a $935,000 payment from a service provider relating to resolution of a contract dispute; the payment will be recorded in the quarter ending September 30, 2022.
- On August 6, 2022, the Compensation Committee extended CEO Panna Sharma’s employment agreement through July 31, 2024, increased annual base salary to $510,000 and approved options for 100,000 shares.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Cash runway assumptions and the timing, amount and terms of future financing.
- Enrollment, clinical data and regulatory milestones for LP-100 and LP-300.
- Progress and funding requirements for LP-184, LP-284 and the ADC program.
- Accrued obligations, milestone payments and manufacturing commitments under license and research agreements.
- Impact of COVID-19, supply-chain constraints, inflation and clinical-trial delays on development schedules and cash burn.
- Valuation and liquidity risks associated with the $18.79 million marketable-securities portfolio and its unrealized losses.
- Potential dilution from outstanding options, warrants and future equity offerings.
- Recognition and timing of the $935,000 service-provider settlement and the potential additional Allarity escrow payment.