CNS Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. CNS is a clinical-stage pharmaceutical company developing anti-cancer candidates, with Berubicin as its lead program. The company reported no revenue and remains dependent on external financing.
Financial results and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| General and administrative expense | $1.15 million | $0.98 million | $2.55 million | $2.34 million |
| Research and development expense | $2.66 million | $1.49 million | $4.87 million | $2.11 million |
| Total operating expenses | $3.81 million | $2.47 million | $7.42 million | $4.44 million |
| Net loss | $3.81 million | $2.47 million | $7.43 million | $4.44 million |
| Basic and diluted loss per share | $0.15 | $0.15 | $0.30 | $0.27 |
| Net cash used in operating activities | Not stated quarterly | Not stated quarterly | $8.31 million | $4.60 million |
At June 30, cash and cash equivalents were $6.89 million, current assets $13.88 million, working capital approximately $12.05 million, and current liabilities $1.83 million. Current liabilities included $177,583 of notes payable. Total assets were $14.24 million and stockholders’ equity was $12.41 million. A $3.57 million subscription receivable was collected on July 1, 2021. Six-month financing cash flow was $1.16 million, including stock and warrant proceeds, net of note repayments. No meaningful revenue or profit margins were reported.
Material changes versus the prior comparable periods
- Q2 net loss increased about 54% year over year; six-month net loss increased about 67%.
- Six-month R&D expense rose about 131%, primarily reflecting drug manufacturing and labor related to Phase II trial preparation. Management expects R&D costs to increase as development expands.
- Six-month operating cash use rose about 81%, while cash declined from $14.04 million at year-end 2020 to $6.89 million at June 30, 2021.
- Common shares outstanding increased to 27.38 million from 23.86 million at December 31, 2020. The company also had 5.13 million warrants and 2.81 million options outstanding at period-end.
Outlook, risks, and notable items
- Management planned a Phase II Berubicin trial in recurrent glioblastoma, with first-patient treatment targeted for Q3 2021. The planned 243-patient study compares Berubicin with Lomustine, uses 2:1 randomization, and identifies overall survival as the primary endpoint. The filing cautions that an infusion treatment may be less attractive to patients than oral standard-of-care therapy.
- On July 24, 2021, after quarter-end, Berubicin received FDA Fast Track Designation. The filing also says the trial was open for enrollment during Q2.
- Management estimated a need for approximately $16 million to complete the Berubicin trial, approximately $2 million for near-term WP1244 preclinical work, and additional working capital. Cash, including the subscription receivable collected after quarter-end, was expected to fund operations into Q2 2022, but not beyond the near term.
- The company reported substantial doubt about its ability to continue as a going concern, citing recurring losses and operating cash outflows and dependence on additional equity or other financing. It may need to delay spending, reduce overhead, or scale back its plan if funding is unavailable.
- Material weaknesses in internal control over financial reporting remained: inadequate segregation of duties and insufficient formal documentation of the control environment. Management reported disclosure controls were not effective and described planned remediation, including additional personnel, consultants, and systems upgrades.
- Key execution and other risks include clinical-trial outcomes and timing, regulatory approval, manufacturing dependence, intellectual-property and license obligations, competition, and related-party arrangements. No legal proceedings were reported as pending.
Important facts for investors to verify
- Whether the Phase II Berubicin trial began on schedule, its enrollment and interim-analysis milestones, and subsequent clinical results.
- Actual cash runway and financing raised after the July 1 collection of the $3.57 million subscription receivable; compare funding needs with trial and WP1244 spending.
- Whether Fast Track status changes review timing or development requirements; it is not FDA approval.
- Progress in remediating the internal-control material weaknesses and any subsequent changes in financial reporting controls.
- Potential dilution from outstanding warrants, options, and use of the up-to-$20 million at-the-market sales agreement, as well as obligations under related-party and other license agreements.