Cingulate Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Cingulate is a pre-revenue biopharmaceutical company developing once-daily drug-delivery products, led by CTx-1301 for ADHD. Its interim financial statements are unaudited.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $3.92 million | $2.12 million | $10.51 million | $7.06 million |
| General and administrative | $1.83 million | $1.85 million | $5.45 million | $5.96 million |
| Operating loss | $5.75 million | $3.97 million | $15.96 million | $13.03 million |
| Net loss | $5.98 million | $4.03 million | $16.60 million | $13.07 million |
| Net loss per share, basic and diluted | $0.30 | $0.36 | $1.16 | $1.16 |
Net loss widened by 48% in Q3 and 27% over the first nine months year over year. The quarterly increase primarily reflected greater clinical-trial spending; nine-month R&D rose 49%, while G&A fell 9%, mainly due to lower insurance expense. Interest and other expense was $0.23 million in Q3 and $0.64 million for the nine months, largely related to the WFIA note.
For the nine months, operating cash use was $12.47 million, investing cash use was $0.04 million, and financing provided $9.14 million. Cash and cash equivalents were $1.99 million at September 30, down from $5.36 million at December 31, 2022. Current assets were $2.90 million versus current liabilities of $5.73 million; total liabilities were $5.97 million and stockholders’ equity was negative $0.10 million. Accumulated deficit was $86.01 million.
At September 30, $3.0 million of principal remained on an unsecured related-party WFIA note bearing 15% annual interest; accrued interest was $157,339. The remaining principal and interest are generally due August 2025, subject to WFIA’s demand rights. The company converted $5.0 million of principal and accrued interest into pre-funded warrants in September.
Capital raises and material changes
- Q3 financing included approximately $4.0 million gross proceeds from a public offering and approximately $1.0 million gross proceeds from a private placement with WFIA, a related party.
- During the first nine months, ATM sales generated $1.70 million net and Lincoln Park sales generated $0.45 million net. The filing reports no sales under either facility after September 30 through the stated MD&A update.
- The September public offering included common shares, pre-funded warrants and Series A and B warrants. The WFIA debt conversion and these offerings materially increased potential share dilution. Shares issued and outstanding were 17.38 million at September 30, versus 11.31 million at December 31, 2022; 18.74 million were reported outstanding as of November 10.
Outlook, development and risks
- Management stated that, based on its operating plan, cash at September 30 was expected to fund development and operations only through mid-November 2023. It estimated approximately $30 million of capital would be needed to target a CTx-1301 NDA filing in the second half of 2024, assuming positive Phase 3 results. Additional funding is also needed for other programs and commercialization.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Management is considering equity, debt, collaborations and other strategic sources; there is no assurance that adequate financing will be available on acceptable terms.
- Two CTx-1301 Phase 3 pediatric studies began in Q3 2023, with results expected in the first half of 2024. The adult Phase 3 dose-optimization study was completed in June 2023. Cingulate expects to submit an NDA in the second half of 2024 if clinical results are positive and regulatory requirements are met.
- CTx-2103 formulation work showed a triple-release buspirone profile; following FDA feedback, the company plans to work toward an IND filing in the first half of 2024. A CTx-1302 Phase 1/2 study was planned for the second half of 2024, with pivotal Phase 3 trials potentially in 2025 if results support progression.
- Nasdaq had notified the company of noncompliance with its minimum stockholders’ equity and $1.00 minimum bid-price requirements. The equity-compliance extension ran through November 13, 2023, subject to milestones; the bid-price compliance period ran through January 24, 2024, with a possible additional period. The company said a reverse stock split was among options it might consider.
- Other risks include dependence on clinical and regulatory outcomes, continuing capital needs, possible dilution, manufacturing and commercialization execution, and potential delays or cost changes from FDA discussions on pediatric-study requirements. The company reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Subsequent financing, cash balance and actual runway after the stated mid-November 2023 estimate.
- Whether Nasdaq equity and bid-price listing requirements were satisfied, and any resulting delisting or reverse-split actions.
- Progress, enrollment, timing and results of the CTx-1301 Phase 3 studies, and any changes to FDA pediatric requirements or the targeted NDA schedule.
- Terms and potential dilution from outstanding pre-funded warrants, Series A and B warrants, the remaining WFIA note and available equity facilities.
- Availability and terms of funding needed to sustain operations and advance development, given the going-concern uncertainty.