Celcuity Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019; filed August 8, 2019. Celcuity is a pre-revenue cellular analysis and diagnostic company developing its CELx platform to identify cancer subtypes and help match patients with targeted therapies.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $1.47 million | $1.55 million | $3.06 million | $3.09 million |
| General and administrative | $0.37 million | $0.38 million | $0.76 million | $0.91 million |
| Total operating expenses | $1.84 million | $1.93 million | $3.82 million | $4.01 million |
| Net loss | $1.72 million | $1.82 million | $3.57 million | $3.78 million |
| Basic and diluted loss per share | $0.17 | $0.18 | $0.35 | $0.37 |
| Cash used in operating activities | Not separately provided | Not separately provided | $2.82 million | $2.78 million |
- At June 30, cash and cash equivalents were $14.92 million and short-term investments were $7.20 million, or approximately $22.11 million combined. Total assets were $23.44 million; total liabilities were $1.05 million.
- Debt was limited to lease liabilities: $22,748 under a finance lease and $327,820 under operating leases. No off-balance-sheet arrangements were reported.
- Gross profit and margins are not applicable because the company had no revenue.
- Six-month investing cash inflow was $1.56 million, mainly investment maturities/sales, while financing provided $0.23 million, primarily from employee option exercises and stock purchases. Cash declined $1.03 million over the six months.
Changes versus prior comparable periods
- Q2 net loss narrowed by approximately 5%; six-month net loss narrowed by approximately 6%. Operating expenses fell 5% in both comparisons.
- Six-month R&D was nearly flat, down 1%; G&A declined 17%, primarily due to lower non-cash stock-based compensation. Interest income rose 13% for the six-month period, attributed to higher market rates.
- Operating cash use increased slightly from $2.78 million to $2.82 million for the first half, despite the lower reported net loss.
- Celcuity adopted lease accounting standard ASC 842 on January 1, 2019, recognizing operating lease right-of-use assets and liabilities; management reported no impact on operating results or cash flows.
Outlook, commentary, and risks
- Management said existing cash was expected to fund operations and obligations for at least the next 24 months, based on its current business plan. It expects R&D and G&A spending to increase, with additional sales and marketing costs as commercialization approaches; further capital may be needed and may not be available on acceptable terms.
- The company was conducting two prospective breast cancer trials using the CELx HSF Test. Interim results were expected in early to mid-2020: one with Genentech and NSABP, and one with Puma Biotechnology and West Cancer Center. A separate 35-patient colorectal cancer tissue study was expected to finish in late 2020; Celcuity said it would not be paid for that testing.
- Celcuity was developing a CELx Multi-Pathway test assessing HER-family and c-Met signaling and planned additional test launches over the next few years. These timelines and plans are forward-looking and not assured.
- Key risks include clinical and regulatory uncertainty, physician and payer adoption and reimbursement, competition, dependence on pharmaceutical partnerships, financing needs, and the ability to protect intellectual property. The company reported no material legal proceedings.
- Management concluded disclosure controls and procedures were not effective as of June 30, 2019, citing previously disclosed ineffective internal control over financial reporting due to limited segregation of duties. No material changes to internal control were reported during the quarter.
- A clinical research organization agreement includes potential milestone and site-related payments estimated at up to approximately $2.69 million. The filing also describes approximately $150,000 of future milestone payments under another clinical research agreement.
Investor facts to verify
- Progress, enrollment, and timing of the two prospective trials, and whether expected 2020 interim results were achieved.
- Whether the stated 24-month cash runway remains supportable as trial, development, and commercialization spending increases.
- Any revenue-generating partnerships, regulatory progress, reimbursement developments, or commercial launch milestones for CELx tests.
- Remediation of the disclosed control weakness and the company’s reported accumulated deficits: the balance sheet shows a $13.05 million deficit for Celcuity Inc.; MD&A separately describes combined deficits of approximately $12.6 million under Celcuity LLC and $13.1 million under Celcuity Inc.
- Potential clinical-study milestone obligations and future financing needs, including dilution or other restrictions from any capital raise.