Lantern Pharma Inc. 2020 Form 10-K Summary
Business context and reporting period
Lantern Pharma is a clinical-stage biotechnology company developing targeted oncology therapies using its RADR® artificial intelligence, machine learning and genomic-data platform. The filing covers the fiscal year ended December 31, 2020, rather than a standalone fourth quarter. The company had no approved products and had generated no operating revenue, except for a prior research grant in 2017.
- Pipeline: LP-100 in a licensee-managed Phase II prostate cancer trial; LP-300 being prepared for a targeted Phase II non-small cell lung cancer trial; LP-184 in preclinical development; and an early-stage antibody-drug-conjugate program initiated in early 2021.
- RADR® included more than 1.2 billion oncology-related data points and was targeted for expansion to approximately three billion data points by the end of 2021.
- The company had 15 employees as of the filing date, including 11 full-time and four part-time employees, and relied extensively on contract research organizations, academic collaborators and contract manufacturers.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| General and administrative expense | $3.665 million | $1.475 million | Up 149% |
| Research and development expense | $2.243 million | $0.953 million | Up 135% |
| Total operating expenses | $5.908 million | $2.428 million | Up 143% |
| Net loss | $5.908 million | $2.428 million | Loss increased $3.480 million |
| Basic and diluted loss per share | $1.37 loss | $1.23 loss | Loss per share increased |
| Cash and cash equivalents | $19.229 million | $1.232 million | Increased $17.997 million |
| Working capital | Approximately $19.685 million | Approximately $0.744 million | Improved substantially |
| Net cash used in operating activities | $5.652 million | $2.128 million | Cash use increased |
| Net cash provided by financing activities | $23.665 million | $2.921 million | Primarily IPO proceeds in 2020 |
Research and development spending included approximately $939,000 for LP-184, $456,000 for LP-300, $443,000 for the RADR® platform, $268,000 for other projects and $137,000 unallocated. Stock-based compensation was approximately $1.192 million in 2020 versus $118,000 in 2019. The company reported no operating margin or profitability because it had no revenue and incurred operating losses.
At December 31, 2020, total assets were $20.360 million, total liabilities were $661,000 and stockholders’ equity was $19.699 million. Debt consisted primarily of a $108,500 Paycheck Protection Program loan, which the company expected to seek forgiveness for in the first half of 2021. The company had no long-term debt outstanding.
Material changes versus the prior comparable period
- The company completed its initial public offering in June 2020, issuing 1.75 million common shares at $15.00 per share and receiving net proceeds of approximately $23.420 million.
- Series A preferred stock converted into common stock in connection with the IPO. Common shares outstanding increased to 6.221 million at December 31, 2020 from 1.978 million at December 31, 2019; the filing reports 11.170 million shares outstanding as of March 8, 2021 after subsequent issuances and offerings.
- Operating expenses increased materially as the company expanded development activities, public-company infrastructure, insurance, personnel, professional services and stock-based compensation.
- COVID-19 slowed LP-100 enrollment and delayed or slowed certain collaborator and service-provider research activities. The company also reduced its office lease commitment as employees worked remotely.
- In December 2020, Lantern amended its AF Chemicals license agreement, including specified payments and a suspension of annual licensing, development-extension and patent-maintenance payments through January 15, 2025, subject to the agreement’s terms.
- After year-end, on January 20, 2021, the company completed a public offering of 4,928,571 shares at $14.00 per share, generating gross proceeds of approximately $69.0 million and net proceeds of approximately $64.2 million.
Guidance, outlook, risks and unusual items
Management did not provide formal revenue, earnings or clinical-success guidance. It expects substantial additional operating losses and increasing research and development and general and administrative expenses as it advances LP-184 and LP-300, maintains RADR®, expands intellectual property and prepares potential clinical trials.
- Management stated that cash at December 31, 2020, together with the approximately $64.2 million of net proceeds from the January 2021 offering, was expected to fund operations and capital requirements for at least 12 months from the filing date, based on stated assumptions.
- LP-300: the company planned discussions with the FDA for a Phase II trial of approximately 40 to 75 patients. Prior overall Phase II and Phase III trials failed their prespecified primary endpoints; favorable subgroup results were retrospective and require confirmation.
- LP-184: the company planned IND-enabling work and a Phase I trial, subject to regulatory clearance, potentially beginning in late 2021 or early 2022. Development remained preclinical.
- LP-100: the Phase II trial managed by Allarity Therapeutics experienced slower enrollment during COVID-19, and Lantern could not forecast completion timing. Allarity had indicated that LP-100 was lower priority than certain other programs.
- All drug candidates remained subject to significant regulatory, clinical, manufacturing, safety, efficacy, enrollment and commercialization uncertainty. None had received FDA or other marketing approval.
- The company relied on third parties for clinical research, manufacturing and development. It had no internal manufacturing facilities, no commercial sales or marketing infrastructure and no redundant supply arrangements.
- Potential future funding needs could result in additional equity dilution, debt obligations or less favorable partnering and licensing terms. The company stated that existing resources would not fund all planned development activities indefinitely.
- Material contractual obligations include license royalties, milestone payments, development diligence requirements and potential payments to AF Chemicals, BioNumerik-related recipients and other counterparties.
- The company disclosed no pending or threatened litigation believed to be material. Management stated that previously identified internal-control material weaknesses had been remediated, although the 2020 Form 10-K did not include management’s Section 404(b) assessment or an auditor attestation because of the emerging-growth-company transition period.
Important facts for investors to verify
- Verify the audited balance sheet, cash balance, accumulated deficit and the effect of the January 2021 financing on cash runway and share dilution.
- Track quarterly cash burn and research and development spending as LP-300 and LP-184 move toward clinical development.
- Verify FDA interactions, IND status, trial initiation, patient enrollment and endpoint design for LP-300 and LP-184.
- Assess whether retrospective LP-300 subgroup findings can be reproduced prospectively in a biomarker-selected trial.
- Monitor Allarity Therapeutics’ funding, enrollment and development decisions for LP-100.
- Review the terms, milestones, royalties, diligence requirements and termination provisions of the AF Chemicals, BioNumerik and Allarity agreements.
- Evaluate the reliability and external validation of RADR® biomarker predictions; reported accuracy measures are primarily historical, retrospective or preclinical.
- Monitor COVID-19 and other disruptions affecting clinical sites, collaborators, contract manufacturers and patient recruitment.
- Consider dilution from outstanding options and warrants: 835,608 options and 325,618 warrants were outstanding at December 31, 2020.