CNS Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance sheet compared with December 31, 2021. CNS is a clinical-stage pharmaceutical company developing cancer drug candidates, principally Berubicin for brain and central nervous system tumors. It reported no revenue for the quarter.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / prior balance sheet |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $1.521 million | $2.207 million |
| General and administrative expense | $1.260 million | $1.403 million |
| Total operating expenses | $2.782 million | $3.610 million |
| Net loss | $2.784 million | $3.613 million |
| Loss per share, basic and diluted | $0.07 | $0.15 |
| Net cash used in operating activities | $3.077 million | $3.308 million |
| Cash and cash equivalents | $12.440 million | $5.005 million at Dec. 31, 2021 |
| Working capital | Approximately $13.664 million | Not stated for comparable period |
| Total liabilities / notes payable | $1.069 million / $0.273 million | $2.136 million / $0.388 million at Dec. 31, 2021 |
Margins are not meaningful because the company reported no revenue. No operating cash-flow break-even or profitability guidance was provided. Cash provided by financing was $10.513 million, mainly from the January equity-and-warrant private placement; investing cash flow was zero. Stockholders’ equity was $14.803 million at quarter-end.
Material changes and financing
- Net loss narrowed by about $0.829 million year over year. Management attributed lower expenses mainly to reduced manufacturing and drug-development costs, lower employee compensation due to incentive-compensation timing, and a credit for payments received from WPD; higher clinical-trial CRO costs and legal and professional fees partly offset the reductions.
- In January, CNS raised $11.497 million gross and received $10.626 million net from a private placement of common shares, pre-funded warrants, and common warrants. The pre-funded warrants were exercised in full by March 31. The financing increased shares outstanding to 40,032,481 at quarter-end; common warrants could purchase a further 12,105,264 shares at $0.82 per share, subject to their terms.
- Operating cash use remained substantial despite being lower than a year earlier. The company has no manufacturing facilities or sales organization and relies on third parties.
Outlook, risks, and notable items
- Funding and going concern: Management said cash was expected to fund planned operations into, but not beyond, the near term; the MD&A estimated funding into the first quarter of 2023. The filing states substantial doubt exists about the company’s ability to continue as a going concern and that additional financing is required. Management estimated approximately $12–$16 million would be needed to complete the Berubicin Phase II trial, plus about $5 million for near-term WP1244/WP1874 preclinical work and additional working capital. These estimates are subject to trial timing and cost uncertainty.
- Clinical development: The Berubicin Phase II trial is for patients with glioblastoma who failed first-line treatment, comparing Berubicin with lomustine, with an estimated 243 participants and overall survival as the primary endpoint. Management expected CRO costs to remain relatively level as site activation transitions to patient-treatment costs, and R&D costs to increase as the trial progresses. Berubicin has FDA Orphan Drug and Fast Track designations; neither assures approval or commercial success.
- Nasdaq listing: CNS received a deficiency notice because its share price was below the $1.00 minimum bid requirement for 30 consecutive business days. It had until August 17, 2022 to regain compliance, with a possible additional 180-day period if eligible; a reverse stock split was identified as a possible measure.
- Controls: Management concluded disclosure controls were ineffective due to material weaknesses, including inadequate segregation of duties and lack of formal control-environment documentation. The company said it was performing additional review procedures and intended to add experienced personnel, retain consultants, and upgrade its accounting system when economically feasible.
- Related-party and collection matters: The company reported licensing, research, and supply relationships involving entities affiliated with founder and significant shareholder Dr. Waldemar Priebe. WPD had not paid a final Berubicin-product invoice; CNS did not record the unpaid amount as a receivable because of collectability concerns and said it was working to resolve the matter.
- Subsequent events: On April 28, 2022, the compensation committee approved $213,000 in officer cash bonuses and awarded 1,142,500 restricted stock units subject to time-, share-price-, and milestone-based vesting.
Important facts for investors to verify
- Current cash runway, expected clinical-trial costs, and the timing and availability of additional financing.
- Berubicin trial enrollment, progress, interim-analysis plans, and whether the estimated trial design or schedule has changed.
- Nasdaq bid-price compliance status and any resulting corporate actions or dilution.
- Exercise and potential dilution from outstanding warrants and equity awards.
- Status and recoverability of the unpaid WPD invoice and the company’s related-party transactions.
- Progress in remediating the disclosed internal-control material weaknesses.