Cellectar Biosciences, Inc. — 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed March 21, 2018. Cellectar is a clinical-stage oncology company developing phospholipid drug conjugates (PDCs). It had no product revenues and depended on external financing.
Financial results and position
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $9.47 million | $4.75 million |
| General and administrative expense | $4.14 million | $4.70 million |
| Operating loss | $13.60 million | $9.45 million |
| Net loss | $13.56 million | $6.18 million |
| Net loss attributable to common stockholders | $15.01 million | $9.36 million |
| Basic and diluted loss per share | $1.07 | $2.14 |
| Cash used in operations | $11.02 million | $8.28 million |
| Cash and cash equivalents at year-end | $10.01 million | $11.44 million |
Margins are not meaningful because the company had no product revenue. Working capital was approximately $8.8 million; total assets were $12.87 million, total liabilities $2.12 million, and stockholders’ equity $10.75 million. The company reported no current note maturities at year-end; capital-lease obligations totaled about $5,000. It raised approximately $7.1 million net in an October 2017 offering and received about $3.0 million from warrant exercises during the year.
Changes versus 2016
- R&D expense rose 99%, primarily reflecting the Phase 2 CLR 131 study, expanded manufacturing and supplier capabilities, preclinical services, and approximately $1.18 million of accelerated depreciation.
- G&A expense fell 12%, mainly due to lower professional, personnel, consulting, investor-relations and compliance costs.
- Net loss increased despite lower G&A, in part because the noncash gain on derivative warrants fell to $22,000 from $3.26 million in 2016.
- Cash declined by approximately $1.44 million. Fixed assets, net, fell to $245,000 from $1.44 million, largely following accelerated depreciation tied to the manufacturing shutdown.
Business, outlook and risks
- Pipeline: Lead candidate CLR 131 was in Phase 1 testing for relapsed/refractory multiple myeloma and a Phase 2 study for multiple myeloma and selected B-cell malignancies. The company reported clinical benefit in all three patients in Phase 1 Cohort 4, including one partial response; these early results are limited and not final. Median overall-survival data were still being collected.
- Programs and collaborations: CLR 1700 and CLR 1900 were preclinical; CLR 1800, CLR 2000, and CLR 2100/2200 were collaboration programs with Pierre Fabre, Avicenna, and Onconova, respectively. The Phase 2 CLR 131 study received support from a $2 million NCI SBIR grant.
- Management outlook: The company expected 2018 R&D expense to be comparable to 2017 excluding the 2017 accelerated depreciation charge. It believed year-end cash would fund budgeted operations into early Q1 2019, but said further operations depended on additional financing or a strategic transaction.
- Going concern: The auditor and management cited substantial doubt about the company’s ability to continue as a going concern. The company had accumulated losses of approximately $84.3 million and expected continued operating losses; it gave no assurance that financing would be available on acceptable terms.
- Manufacturing and workforce: In January 2018, Cellectar began shutting down its Madison manufacturing facility, transferring CLR 131 production to CPDC, and planned to reduce its workforce by six positions. It expected to vacate its leased premises by September 14, 2018. Reliance on third-party manufacturing and research providers creates execution and supply risks.
- Other material risks: Clinical-trial safety, efficacy, timing and enrollment; regulatory approval; access to capital and potential dilution; competition; intellectual-property protection; reimbursement and market acceptance; and possible shutdown/decommissioning costs. No material legal proceedings were reported.
Important facts for investors to verify
- Cash runway assumptions, subsequent cash burn, and the timing and terms of any financing; the filing’s runway estimate is not a guarantee.
- Progress, enrollment, safety findings and controlled efficacy results from CLR 131 trials, including whether preliminary response and survival observations persist in larger studies.
- Successful transfer to CPDC, manufacturing capacity and regulatory readiness for ongoing and planned trials.
- Actual 2018 savings and costs from the facility closure, decommissioning, lease exit and six-position workforce reduction.
- Potential dilution from outstanding warrants, preferred-stock conversion and other share reservations: approximately 13.7 million shares were reserved for future issuance at year-end.
- The filing states that 2016 financial-statement presentation was corrected for a beneficial conversion feature and share-count issue; management considered the effect immaterial to the 2016 statements, but reported that loss per share increased by $0.78.