CEL-SCI Corporation — Form 10-Q Summary
Business context and reporting period. This unaudited Form 10-Q covers the fiscal third quarter ended June 30, 2022, and the nine months then ended. CEL-SCI is a development-stage biotechnology company focused primarily on Multikine, an investigational immunotherapy for advanced head and neck cancer, and preclinical LEAPS technology. It reported no product revenue; its products remain under development.
Key financial metrics
| Metric | Three months ended June 30, 2022 | Nine months ended June 30, 2022 |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Research and development expense | $6.29 million | $18.89 million |
| General and administrative expense | $2.43 million | $8.22 million |
| Operating loss | $8.72 million | $27.11 million |
| Net loss available to common shareholders | $9.93 million | $28.53 million |
| Loss per common share, basic | $0.23 | $0.66 |
| Net cash used in operating activities | Not separately presented | $13.33 million |
At June 30, 2022, cash and cash equivalents were $28.07 million, down from $36.06 million at September 30, 2021; current assets were $30.96 million and current liabilities $4.02 million. Total assets were $56.89 million, compared with $75.87 million at fiscal year-end. The company had $38.73 million of stockholders’ equity.
Lease obligations were a significant liability: finance lease obligations were approximately $13.63 million and operating lease obligations approximately $2.06 million. The filing does not clearly identify conventional borrowings as a separate debt balance. Cash flow from investing activities was a $5.51 million source, mainly reflecting maturity of Treasury bills; financing activities used $0.17 million. The filing does not provide a meaningful gross margin or operating margin because it reported no product revenue.
Material changes versus comparable periods
- For the quarter, total operating expenses fell 17% to $8.72 million from $10.46 million. R&D declined 12%, mainly due to lower Phase 3 study costs; G&A declined 26%, largely reflecting lower employee stock compensation.
- For the nine-month period, operating expenses decreased 2% to $27.11 million from $27.72 million. R&D rose 6% to $18.89 million as higher stock compensation, manufacturing-facility depreciation, and commercial-preparation costs more than offset lower Phase 3 trial costs. G&A fell 17% to $8.22 million, primarily due to lower employee stock compensation.
- Nine-month net loss available to common shareholders was broadly unchanged from $28.51 million in 2021 at $28.53 million in 2022. Quarterly net loss available to common shareholders increased to $9.93 million from $9.20 million.
- Operating cash use improved to $13.33 million from $13.98 million for the nine months. Unlike 2021, the 2022 period included no proceeds from common-stock offerings; 2021 had substantial offering proceeds.
Outlook, commentary, risks and unusual items
- Management expects continued losses and says additional capital or long-term financing will be needed. It plans to seek funding through warrant exercises, partnerships, and debt and/or equity financings, but gives no assurance that funds will be available on acceptable terms or in time.
- The financial statements describe substantial doubt about the company’s ability to continue as a going concern because of recurring losses, future funding needs, and regulatory and commercialization uncertainty. Management says its cash is sufficient for budgeted requirements and that its assessment alleviates substantial doubt for more than twelve months from the financial-statement date. This remains dependent on assumptions and future developments.
- Management reported approximately $63.6 million of direct Phase 3 trial and clinical-study-report costs to date, and estimated another $0.9 million for the remaining trial and report filing; that estimate excludes other related costs, including drug manufacturing.
- The company reported a 14.1 percentage-point five-year survival advantage for the Multikine arm receiving surgery plus radiation (62.7% versus 48.6%; p=0.0236; HR=0.68). However, the combined Phase 3 study did not meet its primary endpoint of a 10% overall-survival improvement when both treatment arms were combined. Multikine is investigational and has not been approved; safety and efficacy for any use have not been established by regulators.
- Warrant expiration dates were extended in June 2022, including warrants held by officers and a trust associated with the CEO. Related accounting included approximately $294,000 as a deemed dividend and approximately $635,000 as interest expense. The filing states warrant holders received the same modified terms.
- COVID-19’s future effect on operations and liquidity remained uncertain. The company reported no significant market-risk exposure and said disclosure controls were effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether CEL-SCI can secure sufficient financing to fund continued operations and its development plans, given cash of $28.07 million and ongoing operating cash burn.
- The regulatory and clinical implications of the Phase 3 trial missing its primary endpoint overall, despite the reported result in the surgery-plus-radiation subgroup.
- The remaining Phase 3, clinical-study-report, and manufacturing costs, including costs excluded from management’s $0.9 million estimate.
- The duration and assumptions underlying management’s conclusion that cash will cover budgeted requirements for more than twelve months.
- Potential dilution from outstanding options and warrants, and the accounting and governance implications of warrant extensions involving related parties.