SELLAS Life Sciences Group, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. SELLAS is a clinical-stage biopharmaceutical company developing GPS, a WT1-targeting cancer immunotherapy, and SLS009, a CDK9 inhibitor. It reported no product sales.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $1.0 million |
| Research and development | $5.8 million | $4.3 million | $18.9 million | $14.4 million |
| General and administrative | $3.5 million | $2.9 million | $10.8 million | $9.0 million |
| Operating loss | $9.4 million | $7.1 million | $29.7 million | $32.5 million |
| Net loss | $9.3 million | $7.0 million | $29.2 million | $32.2 million |
| Basic and diluted loss per share | $0.33 | $0.34 | $1.09 | $1.70 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $26.6 million | $18.7 million |
At September 30, 2023, cash and cash equivalents were $4.0 million, plus $0.1 million restricted cash, versus $17.1 million and $0.1 million, respectively, at December 31, 2022. Total assets were $8.1 million; current liabilities were $11.7 million; total liabilities were $11.9 million; and stockholders’ equity was a deficit of $3.8 million. The filing shows no borrowings in the balance sheet; liabilities primarily include accounts payable, accrued expenses and lease obligations. The company had an accumulated deficit of $209.1 million.
Cash and restricted cash declined $13.2 million over the first nine months. Financing provided $18.9 million, primarily from the February 2023 equity-and-warrant offering; investing used $5.5 million for SLS009 license payments. No meaningful operating margin is available given the absence of product revenue.
Changes versus the prior comparable periods
- Q3 net loss increased $2.2 million year over year as operating expenses rose $2.2 million, chiefly due to higher clinical trial, manufacturing, consulting and personnel costs.
- Nine-month net loss improved $3.0 million, despite higher R&D and G&A, mainly because 2022 included $10.0 million of acquired in-process R&D expense and $1.0 million of licensing revenue. R&D rose $4.5 million and G&A rose $1.8 million.
- Operating cash use increased $7.9 million year over year. The company ended the period with substantially less cash than at year-end 2022.
- Common shares outstanding increased from 21.0 million at December 31, 2022 to 28.4 million at September 30, 2023, reflecting financing and other share issuances.
Outlook, developments and risks
- Going concern and funding: Management stated that September-end cash, together with proceeds from the subsequent October offering, would not fund planned operations for at least 12 months from issuance of the financial statements. The filing identifies substantial doubt about the company’s ability to continue as a going concern. Additional financing is required; absent funding, SELLAS may scale back plans or place activities on hold. No other committed funding source beyond its equity sales agreement was identified.
- Subsequent financing: On October 30, 2023, SELLAS agreed to a registered direct offering that generated approximately $4.0 million gross, before fees and expenses, through common shares and pre-funded warrants, with accompanying warrants. The pre-funded warrants were subsequently exercised. These transactions, along with later ATM sales, contributed to 32.1 million shares outstanding as of November 8, 2023. The February 2023 offering warrants’ exercise price was subsequently reduced to $0.9702, increasing potential dilution.
- Potential 3DMed payments: Enrollment of approximately 20–25 China patients in the REGAL study was expected to trigger $13.0 million in development milestones, but timing was subject to operational delays and the payments were variable and outside SELLAS’s control; they were excluded from the going-concern assessment. A further $191.5 million in potential 3DMed milestones, excluding royalties, also remained contingent.
- Clinical outlook: Management expected REGAL enrollment outside China to complete in November 2023. Its event-driven interim analysis after 60 deaths was expected by year-end 2023 or early 2024, and final analysis after 80 deaths by year-end 2024; actual timing could differ. In SLS009, the company reported positive early results in relapsed/refractory lymphoma and AML studies. Additional Phase 2a AML data at the 45 mg and 60 mg doses was expected in Q4 2024. These are development-stage results and do not establish approval or commercial success.
- SELLAS expects R&D spending to increase as trials advance. Clinical development, enrollment timing, regulatory outcomes, financing availability, competition and the ability to obtain approvals and achieve market acceptance are material risks. The company reported no pending or threatened litigation and no material change in disclosure controls.
Most important facts for investors to verify
- Available cash, subsequent financing proceeds and the company’s ability to secure enough capital to fund operations, given the stated going-concern doubt.
- REGAL enrollment and event timing, and whether the interim and final analyses meet their projected schedules.
- Whether 3DMed enrolls the anticipated China patients and whether the $13.0 million milestone payments are triggered and received.
- Follow-up, durability and larger-trial confirmation of reported SLS009 results, including the planned timing of further AML data.
- Actual diluted share count and potential dilution from issued warrants, options, equity plans and further equity financing.