Pasithea Therapeutics Corp. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. The company is a clinical-stage biotechnology business developing treatments for CNS disorders and RASopathies. Its lead candidate is PAS-004, a MEK inhibitor; three other programs were at discovery stage. The Clinics business was discontinued or sold by June 30, 2023.
Financial results and position
- Revenue: No revenue from continuing operations is reported. Discontinued Clinics operations had no revenue in 2023, compared with $218,608 for Q3 2022 and $245,847 for the first nine months of 2022.
- Losses: Q3 2023 operating loss was $3.79 million and net loss was $3.61 million, versus net loss of $4.59 million in Q3 2022. Nine-month 2023 operating loss was $10.83 million and net loss was $10.91 million, versus net loss of $8.82 million in the prior-year period. Basic and diluted loss per share from continuing operations was $0.14 for Q3 and $0.41 for nine months.
- Expenses: Q3 and nine-month R&D expense was $1.62 million and $4.75 million, respectively. SG&A was $2.16 million and $6.08 million. With no ongoing revenue, operating margins are not meaningful.
- Cash flow: Nine-month cash used in operating activities was $9.52 million. Cash declined $13.50 million to $19.58 million, including $3.73 million used for the stock repurchase. Investing activities provided $20,663.
- Liquidity and obligations: Working capital was $18.73 million at quarter-end, down from $32.27 million at December 31, 2022. Total liabilities were $2.28 million, including $385,288 of operating lease liabilities and $29,059 of warrant liabilities. The insurance-premium note payable was fully repaid; no income-tax provision was recorded.
Material changes versus prior comparable periods
- Q3 net loss narrowed by $973,540, mainly reflecting the absence of discontinued Clinics losses and improved other income; continuing-operations loss improved by $578,451.
- Nine-month net loss increased by $2.09 million. R&D expense rose $3.47 million as PAS-004 and PAS-003 development activities expanded; SG&A fell $1.19 million, primarily due to the Clinics discontinuation.
- The company repurchased and retired 5,323,451 shares for approximately $3.73 million, reducing shares outstanding. It reported 20,836,623 common shares outstanding as of November 9, 2023.
Outlook, commentary and risks
- Management said existing working capital should meet needs for twelve months from the financial-statement issuance date, but the company expects significant operating losses and needs additional funding through equity, debt or other sources. It had no credit facility or committed capital source.
- Management expected R&D expense to increase through the rest of 2023, primarily for PAS-004 manufacturing, regulatory and clinical development, while SG&A was expected to remain relatively flat. No quantified revenue or earnings guidance was provided.
- The company said PAS-004 had completed preclinical and animal toxicology studies to support a regulatory submission and anticipated a first-in-human Phase 1 trial after regulatory acceptance. On November 9, 2023, it announced selection of PAS-003 as its ALS lead candidate, ready for manufacturing and IND-enabling studies.
- Key risks include clinical and regulatory uncertainty, dependence on third-party development and manufacturing, significant future capital needs, competition, and intellectual-property risks. The filing cited inflation-related cost pressure. The company reported no material legal proceedings, no material changes to the prior Form 10-K risk factors, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Timing and acceptance of PAS-004 regulatory submissions and plans for initiating Phase 1 testing.
- Cash runway against actual operating burn, development costs and the need for additional financing.
- Progress, cost and IND-enabling timeline for PAS-003 following its lead-candidate selection.
- Potential dilution: 15,356,000 warrants and 1,980,000 stock options were outstanding at September 30, 2023; confirm their terms and any subsequent changes.
- Final cash impact and share-count effects of the tender offer, and collection of the $95,000 still due from the Clinics asset sale.