Candel Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited filing was submitted May 11, 2023. Candel is a clinical-stage biopharmaceutical company developing viral immunotherapies; it has no approved products and has not generated product-sales revenue.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No revenue | $31,000 research and development service revenue |
| Research and development expense | $5.469 million | $5.417 million; up $52,000 |
| General and administrative expense | $4.164 million | $3.600 million; up $564,000 |
| Operating loss | $9.633 million | $8.986 million |
| Net loss | $8.795 million | $874,000 |
| Basic and diluted loss per share | $0.30 | $0.03 |
| Net cash used in operating activities | $10.819 million | $8.053 million |
Q1 2023 net loss included $724,000 of noncash income from a decrease in the fair value of warrant liabilities, compared with $8.287 million of such income in Q1 2022. This difference materially affects the year-over-year net-loss comparison. No meaningful operating margin comparison is applicable given the absence of product revenue.
- Cash and liquidity: Cash and cash equivalents were $59.3 million at March 31, 2023, down from $70.1 million at December 31, 2022. Including $266,000 of restricted cash, quarter-end cash was $59.5 million. Current assets were $61.9 million and current liabilities $5.2 million.
- Debt: The balance sheet reported approximately $20.3 million carrying value of SVB term loan, including $1.3 million classified as current, plus $674,000 of other long-term debt. Management reported approximately $21.0 million of debt. The $20 million SVB loan bears a floating rate; its weighted-average effective rate was 10.08% at quarter end. Principal payments begin February 2024, and the loan matures January 2026.
- Equity: Stockholders’ equity was $39.7 million, down from $47.7 million at year-end 2022; accumulated deficit was $107.9 million. Shares outstanding were 28,919,810 at March 31 and May 3, 2023.
Material changes and operating developments
- Operating cash use increased by $2.8 million year over year. The company attributed the Q1 2023 cash use mainly to clinical-program, headcount and public-company costs, as well as reductions in accrued expenses and increased prepaid expenses.
- R&D expense was broadly flat: higher CAN-2409 clinical development, manufacturing and regulatory costs were largely offset by lower employee-related and preclinical costs. G&A increased, mainly from compensation, severance and professional fees, partly offset by lower directors’ and officers’ insurance expense.
- No financing cash flow occurred in Q1 2023; Q1 2022 included $19.9 million of net proceeds from the bank term loan. The company reported no sales under its $75 million at-the-market program as of the filing date.
- In March 2023, Candel paused new enrollment in its randomized Phase 2 pancreatic cancer trial, subject to additional funding. It said it still expected initial data in Q4 2023.
Outlook, risks and contingencies
- Funding and going concern: The company stated that substantial doubt exists about its ability to continue as a going concern for the one-year period following issuance of the financial statements. It said current cash was expected to fund the operating and capital plan into Q2 2024, but also said additional funding is required to sustain operations beyond the relevant one-year period. Funding is not committed or assured; failure to raise capital could force reductions, delays or cancellation of development activities. The accounts include no adjustments for the outcome of this uncertainty.
- Pipeline and timing: The pivotal Phase 3 CAN-2409 localized prostate cancer trial completed enrollment in September 2021; topline data were expected at the end of 2024. The Phase 2 active-surveillance prostate study was expected to report topline data in Q4 2024. The CAN-2409 NSCLC Phase 2 trial continued, with additional data anticipated in Q3 2023. The filing reported FDA fast track designation for CAN-2409 in NSCLC, announced in April 2023. CAN-3110 was being studied in an investigator-sponsored Phase 1 recurrent high-grade glioma trial; the company described prior data as preliminary and anticipated further presentation in May 2023.
- Clinical and regulatory risks: Candidates remain investigational. Trial outcomes, safety, enrollment, manufacturing, regulatory review and commercial acceptance are uncertain. The FDA Special Protocol Assessment for the prostate Phase 3 trial does not guarantee approval; the company disclosed protocol amendments without an SPA amendment.
- Debt and financing risks: The SVB loan is secured by substantially all company assets other than intellectual property, which is subject to a negative pledge. Variable interest rates, loan covenants, future principal payments and possible dilution or unfavorable financing terms could affect liquidity and flexibility.
- Legal contingency: Periphagen alleges Candel failed to use commercially reasonable efforts to complete a human proof-of-concept trial for an NT-3 asset. Candel denies the claims; Periphagen filed counterclaims in March 2023. If unresolved through the contractual process, an arbitrator may decide the dispute. The filing says Candel may make a specified payment in lieu of satisfying the obligations if the arbitrator rules against it; Periphagen may also seek termination of the license.
- Other risks: The company cited dependence on CAN-2409 and CAN-3110, potential manufacturing and supply delays, third-party licensing and trial risks, competition, reimbursement uncertainty, and possible additional financing needs. Management said disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2023, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Candel raises sufficient capital, on acceptable terms, to address the stated going-concern doubt and support its operating plan.
- Whether actual cash use and clinical spending track the stated runway into Q2 2024.
- Timelines, enrollment status and final results for the prostate, NSCLC, pancreatic cancer and CAN-3110 trials; distinguish preliminary updates from complete, audited trial results.
- Whether the pancreatic trial resumes, and the status and financial or license consequences of the Periphagen arbitration.
- SVB loan terms and servicing, available financing capacity, and potential dilution from equity issuance, options and warrants.