SELLAS Life Sciences Group, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. SELLAS is a clinical-stage biopharmaceutical company developing cancer therapies; it reported no product-sale revenue. Financial amounts below are in U.S. dollars.
Financial results and position
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Licensing revenue | $1.0 million | $5.7 million |
| Research and development expense | $4.6 million | $4.3 million |
| Acquired in-process R&D expense | $10.0 million | None |
| General and administrative expense | $3.0 million | $3.6 million |
| Operating loss | $16.7 million | $2.2 million |
| Net loss | $16.7 million | $2.4 million |
| Basic and diluted loss per share | $1.05 | $0.16 |
| Operating cash used | $7.2 million | $10.3 million |
Licensing revenue was entirely related to the 3D Medicines (3DMed) agreement. The Q1 2022 revenue reflects a $1.0 million milestone triggered by Chinese IND approval for GPS; the payment was received after quarter-end. No product royalties had been recognized. Gross margin was not separately stated, and product-sales margins are not applicable because SELLAS had no product sales.
At March 31, cash and cash equivalents were $14.3 million, restricted cash was $0.1 million, total assets were $21.4 million, and current liabilities were $10.7 million. Total liabilities were $17.4 million, including $10.0 million payable for the GFH009 license fee and $1.2 million in operating lease liabilities. The filing reports no debt balance. Stockholders’ equity was $4.0 million, versus $20.3 million at December 31, 2021. The accumulated deficit was $155.3 million.
Changes and notable items
- Revenue fell $4.7 million year over year as the prior-year period included recognition of earlier 3DMed license consideration.
- Net loss widened by $14.3 million. The principal unusual item was the $10.0 million upfront GFH009 license expense, recognized because the licensed technology had no alternative future use. R&D spending also increased, primarily from GPS Phase 3 trial costs; lower G&A partially offset these increases.
- Cash used in operations declined year over year, partly reflecting different working-capital movements. Q1 2022 financing cash flow was $0.05 million from employee stock purchases; Q1 2021 included $3.0 million from warrant exercises.
- On April 5, 2022, after quarter-end, SELLAS raised approximately $23.0 million net in an offering of 4,629,630 shares and warrants to buy an additional 4,629,630 shares at $5.40 per share. The warrants are immediately exercisable and expire in 2027.
Outlook, risks, and contingencies
- Management expected cash on hand plus April offering proceeds to fund planned operations for at least 12 months from issuance of the financial statements. SELLAS nevertheless expects continuing operating losses and negative operating cash flows for the next few years and anticipates needing additional funding to reach profitability. Funding needs could require further financing or program reductions; future financing could dilute shareholders.
- For GPS, management expected REGAL Phase 3 enrollment to finish in late 2022 or early Q1 2023, with the planned interim analysis after 80 deaths expected by the end of H1 2023. These are estimates dependent on enrollment, survival assumptions, and trial-site conditions.
- GFH009 was licensed for development and commercialization outside Greater China. The agreement includes a $10.0 million upfront and technology-transfer fee, up to $48.0 million in development and regulatory milestones, up to $92.0 million in sales milestones, and tiered single-digit royalties. The filing described a Phase 1 trial and planned later-stage studies; timing and results remain uncertain. Failure to meet license obligations could put the license at risk.
- 3DMed’s GPS IND approval triggered a $1.0 million payment received in Q2. Up to $191.5 million in additional development, regulatory, and sales milestones remained possible, but these are contingent and not under SELLAS’s control. A further milestone tied to starting a Phase 2 trial was expected in H2 2022, subject to satisfactory Phase 1 safety data and potential China COVID-related delays.
- COVID-19 disruptions, including site staffing and enrollment delays, supply-chain issues, and China lockdowns, could affect clinical programs and collaborators. The filing stated that the extent and duration of these effects were uncertain.
- No pending or threatened litigation was reported as of March 31, 2022. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether cash use and operating assumptions support management’s stated 12-month runway, and whether additional financing will be needed sooner.
- REGAL enrollment progress and the timing of the event-driven interim analysis, including the effect of COVID-related site delays.
- GFH009 trial progress, upcoming license payments and milestones, and compliance with GenFleet agreement obligations.
- Whether 3DMed advances GPS into Phase 2 and triggers additional milestone payments, and how China operating conditions affect timing.
- The dilution impact of the April offering and warrants, alongside any future use of the remaining approximately $40.5 million capacity under the company’s equity sales agreement.