Candel Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. The company is a clinical-stage biotechnology business developing oncolytic viral immunotherapies, including CAN-2409 and CAN-3110. It has not generated product-sales revenue.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Interim financial statements are unaudited.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development service revenue | $0.031 | $0.031 | $0.094 | $0.094 |
| Research and development expense | $5.265 | $1.813 | $11.324 | $5.220 |
| General and administrative expense | $2.795 | $0.967 | $6.756 | $2.559 |
| Operating loss | $(8.029) | $(2.749) | $(17.986) | $(7.685) |
| Net loss | $(16.162) | $(2.554) | $(37.720) | $(7.202) |
| Net loss per share, basic and diluted | $(0.69) | $(0.22) | $(2.42) | $(0.62) |
| Net cash used in operating activities | — | — | $(16.980) | $(5.655) |
- At September 30, cash and cash equivalents were $88.385 million; total assets were $95.960 million. The company reported $4.397 million in current liabilities, $0.541 million in long-term debt, and a $27.450 million warrant liability. Stockholders’ equity was $62.987 million.
- Cash increased by $53.489 million in the first nine months, largely reflecting $71.335 million in net IPO proceeds. Investing activities used $1.331 million, primarily for fixed assets.
- The company had no meaningful product-sales base from which to assess operating margins. Its small service revenue was recognized under a related-party license agreement with Ventagen.
Changes versus the prior comparable periods
- Q3 operating expenses rose $5.280 million year over year; nine-month expenses increased $10.301 million. The company cited higher headcount and stock-based compensation, as well as increased regulatory, manufacturing, public-company, and other costs.
- Net loss widened substantially, partly because remeasurement of the warrant liability caused a noncash expense of $8.250 million in Q3 and $20.619 million for the nine-month period. This valuation change reflected, among other factors, the higher common-stock value after the IPO and an extension of the warrants’ term.
- The IPO closed in July 2021, with the underwriters’ partial over-allotment exercised in August. The company issued 9,887,994 shares at $8.00 per share, receiving $71.335 million net. Preferred stock converted into common stock at closing; shares outstanding were 28,689,842 at September 30.
- The $0.464 million PPP loan was forgiven in April 2021 and recorded as grant income.
Outlook, business developments, and risks
- Management said cash and cash equivalents on hand were expected to fund planned operating expenses and capital expenditures through the first quarter of 2023. This estimate depends on assumptions and could prove too optimistic; the company expects expenses to increase and has no committed external funding source.
- CAN-2409’s Phase 3 trial in newly diagnosed localized prostate cancer completed enrollment in September 2021; final data readout was expected in 2024. The company intended to initiate a potential registrational Phase 3 trial in high-grade glioma in the first half of 2022. Additional CAN-3110 biomarker results were expected in Q4 2021.
- The prostate-cancer Phase 3 trial has an FDA Special Protocol Assessment, but the filing cautions that this does not ensure approval or a favorable regulatory outcome. The filing also notes that protocol amendments had been made without an SPA amendment.
- COVID-19 had caused some clinical-site closures and enrollment delays, which the company said had not materially affected development timelines to date. Further disruption to trials, manufacturing, supply chains, or financing remained a risk.
- Key risks include clinical failure or safety issues, regulatory uncertainty, reliance on CAN-2409 and CAN-3110, manufacturing-facility transition and third-party supply risks, need for additional capital and potential shareholder dilution, competition, and intellectual-property or licensing disputes. The company reported no material legal proceedings.
- Management stated that disclosure controls were effective as of September 30, 2021. Separately, the risk factors describe material weaknesses identified in connection with prior audits and ongoing remediation efforts; the company cautioned that remediation might not be sufficient.
Important facts for investors to verify
- Whether the company’s cash runway assumptions remain valid as clinical, manufacturing, and public-company costs rise.
- Progress and results for CAN-2409 and CAN-3110, including the prostate Phase 3 readout timing, planned high-grade glioma trial, and safety findings.
- The warrant terms, potential future share issuance, and effects of warrant fair-value changes on reported losses; the liability is based on significant unobservable valuation inputs.
- Manufacturing-facility qualification, third-party manufacturing arrangements, and whether supply or process changes affect trial schedules.
- Remediation of previously identified internal-control weaknesses and the implications of the related-party Ventagen arrangement.