Cellectar Biosciences, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Cellectar is a clinical-stage biopharmaceutical company developing phospholipid drug conjugates (PDCs) for cancer. It reported no product revenue and remains dependent on financing to fund research and development.
Key financial results
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $2.176 million | $0.965 million | $4.033 million | $2.005 million |
| General and administrative expense | $1.041 million | $1.368 million | $1.996 million | $2.329 million |
| Total costs and expenses | $3.216 million | $2.333 million | $6.029 million | $4.334 million |
| Net loss | $3.122 million | $2.133 million | $6.013 million | $1.308 million |
| Basic and diluted loss per share | $0.23 | $0.49 | $0.47 | $0.50 |
Margins: Not meaningful because the company reported no revenue. The filing reports operating losses, not positive operating income.
Cash flow and liquidity: For the six months, operating cash use was $5.651 million and capital expenditures were $0.321 million. Financing activities provided $2.840 million, including $2.941 million from warrant exercises. Cash and cash equivalents were $8.313 million at June 30, down from $11.445 million at December 31, 2016; restricted cash was $55,000. Current assets were $9.338 million versus current liabilities of $1.589 million. Stockholders’ equity was $10.865 million.
Debt: The company paid off $86,591 of current notes payable during the first quarter; the two Wisconsin Economic Development Corporation loans, with original principal totaling $450,000, were paid in full. Remaining reported obligations included $6,649 of capital leases.
Changes and notable items
- Q2 R&D expense rose about $1.211 million year over year. For the first half, it increased about $2.028 million, or 100%, chiefly due to starting the CLR 131 Phase 2 study and establishing secondary manufacturing capability; those items accounted for about $1.560 million of the increase.
- First-half G&A expense declined about $333,000, or 14%, primarily from lower legal, accounting, consulting, and public-company costs, partly offset by increased personnel costs.
- First-half 2017 net loss was substantially larger than in 2016, when results included a $3.023 million gain from warrant revaluation. The comparable 2017 gain was approximately $8,000. These noncash warrant valuation changes make period-to-period net loss comparisons less indicative of operating performance.
- Series C warrant exercises generated $2.941 million in the first half. Common shares outstanding were 13.462 million at June 30 and 13.922 million as of August 9, 2017. At June 30, 8.742 million warrants and 1.019 million stock options and grants were reserved or outstanding for potential issuance.
Outlook, risks, and contingencies
- Management said the June 30 cash balance was expected to fund operations at budgeted levels into the second quarter of 2018. Funding beyond then depends on obtaining additional capital through equity or debt, a strategic transaction, or other sources. The company said it had not entered negotiations for such transactions and gave no assurance of obtaining funding.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year of issuance of the financial statements. Management expects continued operating losses for the foreseeable future.
- CLR 131 was being evaluated in Phase 1 and Phase 2 studies, including a Phase 2 study initiated in March 2017; the filing describes advancement through Phase 1 dose cohorts and the study’s safety and efficacy objectives. CLR CTX candidates remained preclinical. No formal financial guidance was provided.
- Key risks include clinical and regulatory failure, lack of product revenue, financing availability and potential dilution, competition, and the ability to manufacture and commercialize any successful candidates. The filing reported no legal proceedings expected to materially affect the financial statements. Disclosure controls were judged effective; no significant changes in internal control were reported.
Important facts for investors to verify
- Whether cash burn, study spending, and management’s projected runway remain consistent with funding operations into Q2 2018.
- Progress, safety findings, enrollment, and costs for CLR 131 Phase 1 and Phase 2 studies, plus any subsequent clinical or regulatory updates.
- Availability and terms of future financing, including the potential dilution from outstanding warrants, options, and grants.
- The assumptions and accounting treatment behind the warrant derivative valuation gains and losses.