Cingulate Inc. — Q2 2022 Form 10-Q
Business and period: Clinical-stage biopharmaceutical company developing once-daily, multi-dose drug-delivery products, initially for ADHD. This unaudited report covers the quarter and six months ended June 30, 2022. The company has no approved products and has generated no revenue.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $2.18 million | $4.94 million | $0.79 million; $1.36 million |
| General and administrative expense | $1.87 million | $4.12 million | $0.63 million; $1.40 million |
| Net loss | $4.04 million | $9.04 million | $1.43 million; $2.77 million |
| Net loss per share | $0.36 | $0.80 | Not clearly comparable in the filing |
| Net cash used in operations | Not separately presented | $8.28 million | $3.22 million |
For the six months, investing activities used $0.01 million and financing activities used $0.01 million; cash decreased $8.30 million. Cash and cash equivalents were $8.20 million at June 30, 2022, versus $16.49 million at December 31, 2021. Total assets were $13.80 million, total liabilities $1.62 million, and stockholders’ equity $12.18 million. Accumulated deficit was $60.78 million. Operating margins are not meaningful because the company had no revenue.
At June 30, liabilities primarily included operating lease obligations and finance leases; the filing reports no material conventional borrowings at that date. On August 10, 2022, the company received $5.0 million under an unsecured related-party note bearing 15% annual interest. Principal and accrued interest are due August 8, 2025, subject to WFIA’s right, beginning April 1, 2023, to demand payment on 120 days’ notice during specified quarterly windows.
Changes, outlook and risks
- Compared with 2021, Q2 operating expenses rose substantially: R&D increased 174% and G&A increased about 197%; six-month net loss increased 227%. R&D growth reflected CTx-1301 trial preparation, clinical-supply manufacturing and added personnel. G&A growth largely reflected public-company costs, including insurance, professional fees and staffing.
- Management expects cash, including the subsequent $5.0 million financing, to fund operations through the first quarter of 2023. It estimates approximately $16.5 million of additional capital is needed to support a late-2023 CTx-1301 NDA filing, and says further funding is needed for other programs. Management states substantial doubt exists about the company’s ability to continue as a going concern within one year after the financial statements’ issuance.
- CTx-1301: Phase 3 first-patient dosing was anticipated in late 2022, with study results expected in the second half of 2023 and a food-effect study planned for Q4 2022. A late-2023 NDA submission is conditional on positive results. The company reported manufacturing and delivery delays at its contract manufacturer; production of the final two required dosage strengths was expected to begin in the second half of 2022.
- CTx-1302: a Phase 1/2 bioavailability study was planned for 2023; pivotal Phase 3 trials were contemplated for 2024 if results are successful. CTx-2103: a human formulation study began in May 2022, with results expected by the end of August 2022.
- A $250,000 license milestone related to first-patient dosing in the CTx-1301 Phase 3 trial was accrued as probable. Additional licensing milestones depend on future trial, filing and approval events. The company reports no material pending legal proceedings.
- COVID-19 had no material impact on Q2 2022 results or operations, according to management, but future effects and supply-chain, trial, financing and clinical-supply disruptions remain uncertain. Equity financing could dilute shareholders; debt could add payment obligations; collaborations could require surrendering valuable rights.
Most important facts for investors to verify
- Available cash and the pace of cash burn against the stated Q1 2023 runway and the estimated $16.5 million funding need.
- Execution of CTx-1301 clinical-supply manufacturing, first-patient dosing, trial results and NDA timing.
- Terms, repayment-demand provisions and related-party governance of the 15% WFIA note, and the company’s plans for further financing.
- Development progress and timelines for CTx-1302 and CTx-2103, and whether milestone payments or other costs become probable.
- Potential dilution: 883,801 stock options and 4,999,998 warrants were outstanding at June 30, 2022, excluding other possible future equity issuance.