SELLAS Life Sciences Group, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. SELLAS is a late-stage clinical biopharmaceutical company developing cancer therapies, principally GPS and GFH009. Results are unaudited.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Licensing revenue | $0 | $0 | $1.0 million | $7.6 million |
| Research and development | $4.3 million | $4.5 million | $14.4 million | $12.3 million |
| Total operating expenses | $7.1 million | $7.0 million | $33.5 million | $21.3 million |
| Operating loss | $7.1 million | $7.0 million | $32.5 million | $13.7 million |
| Net loss | $7.0 million | $7.1 million | $32.2 million | $14.1 million |
| Basic and diluted loss per share | $0.34 | $0.45 | $1.70 | $0.92 |
SELLAS reported no product-sales revenue. Licensing revenue was milestone and license-related; therefore, a conventional product gross margin is not meaningful. Nine-month licensing revenue fell $6.6 million year over year, while operating expenses rose $12.2 million. The increased loss included a one-time $10.0 million GFH009 in-process research and development charge.
At September 30, cash and cash equivalents were $21.3 million, restricted cash was $0.1 million, and total assets were $26.0 million. Current liabilities were $12.6 million, including a $5.5 million GFH009 license-fee payable; total liabilities were $13.4 million. The balance sheet reports no conventional interest-bearing debt. Nine-month operating cash use was $18.7 million, versus $21.0 million in 2021; investing cash use was $4.5 million, and financing provided $23.2 million. Cash, cash equivalents and restricted cash totaled $21.4 million at period-end, essentially unchanged from the beginning of 2022.
Management stated that available cash would not fund planned operations for at least 12 months from issuance of the financial statements, raising substantial doubt about the company’s ability to continue as a going concern. The company had an accumulated deficit of $170.8 million and said it would need substantial additional financing.
Programs, outlook and material developments
- GPS / REGAL: After reviewing blinded pooled data, management said median overall survival appeared approximately twice as long as originally anticipated. It revised study targets: enrollment increased from 116 to 125–140; the interim analysis target decreased from 80 to 60 deaths, expected in late 2023 or early 2024; and the final analysis target decreased from 105 to 80 deaths, expected by year-end 2024. Timing remains event-driven. The filing estimates statistical significance would require an overall-survival hazard ratio of 0.636, corresponding to 12.6 months versus 8 months for GPS and best available treatment.
- GFH009: The March 2022 GenFleet license covers rights outside Greater China. The $10.0 million upfront and technology-transfer fee was expensed; $4.5 million was paid and $5.5 million remained payable. Additional potential payments include up to $48.0 million in development and regulatory milestones, $92.0 million in sales milestones, and tiered royalties. Management expected twice-weekly Phase 1 enrollment to finish by year-end 2022 and once-weekly cohorts in early 2023; it planned Phase 2 studies in AML and solid tumors, with the AML study expected to begin by the end of Q1 2023.
- 3DMed license: The company recognized $1.0 million of revenue after China’s NMPA approved an IND for a GPS Phase 1 study. SELLAS expected $13.0 million in development milestones from 3DMed’s planned participation in REGAL in China in the first half of 2023; receipt is contingent on the participation. A further $191.5 million in potential milestones remained, subject to achievement and not under SELLAS’s control.
- Clinical data disclosed after quarter-end: On November 10, 2022, SELLAS reported confirmatory topline data from 17 evaluable patients in a GPS-plus-pembrolizumab ovarian cancer study. These were small, early-stage results, and the cited pembrolizumab-only comparisons were from a similar population in a separate study, not a randomized control within this trial.
- Financing and dilution: The April 2022 public offering generated approximately $23.0 million net and included warrants to purchase 4.63 million shares at $5.40 per share. The company also had approximately $40.4 million of gross capacity remaining under its at-the-market sales agreement. Common shares outstanding increased to 20.59 million from 15.90 million at December 31, 2021; 5.15 million warrants were outstanding at September 30.
- Risks and contingencies: Management cited clinical and regulatory uncertainty, trial enrollment and site delays, COVID-19-related disruption, inflation, supply-chain and labor constraints, and dependence on future financing and partnerships. The filing reported no pending or threatened litigation as of September 30. No material subsequent events were reported in the financial statement note apart from matters disclosed elsewhere in the filing.
Most important facts for investors to verify
- Whether SELLAS secures sufficient financing to fund operations, and the timing and dilution terms of any equity or other financing.
- Actual cash burn, the timing of the $5.5 million GFH009 payment, and whether the expected 3DMed milestones are received.
- REGAL enrollment, event accumulation, revised analysis timing, and eventual efficacy results.
- GFH009 Phase 1 safety, dose selection, and whether planned Phase 2 trials proceed on schedule.
- The full study design, follow-up, and independent validation of reported GPS combination-trial results.