Celcuity Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Celcuity is a clinical-stage biotechnology company developing its CELsignia living-tumor-cell diagnostic platform and companion tests. It has not generated revenue and continues to fund operations through capital raised from investors.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $1.96 million | $1.71 million | $5.58 million | $4.77 million |
| General and administrative | $0.52 million | $0.38 million | $1.43 million | $1.14 million |
| Total operating expenses | $2.48 million | $2.09 million | $7.00 million | $5.91 million |
| Net loss | $2.47 million | $1.98 million | $6.92 million | $5.55 million |
| Basic and diluted loss per share | $0.24 | $0.19 | $0.67 | $0.54 |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $5.04 million | $4.29 million |
At September 30, 2020, cash and cash equivalents were $13.70 million, down from $18.74 million at December 31, 2019. Total assets were $14.91 million; total liabilities were $1.15 million, including $15,555 of finance lease liabilities and $296,440 of operating lease liabilities. The filing reports no other borrowings. Stockholders’ equity was $13.76 million. Profit margins are not applicable because the company had no revenue.
Material changes versus prior comparable periods
- Q3 operating expenses rose 19% year over year and net loss widened 25%. For the first nine months, operating expenses rose 19% and net loss widened 25%.
- R&D expense increased 15% in Q3 and 17% year to date, mainly from compensation and stock-based compensation, alongside clinical validation and laboratory work. G&A increased 36% in Q3 and 26% year to date, reflecting compensation and public-company professional fees.
- Lower market interest rates reduced interest income 95% in Q3 and 77% year to date.
- Operating cash use increased from $4.29 million to $5.04 million year to date. The prior-year investing cash inflow included $4.75 million of proceeds from investment sales; 2020 investing cash use was $75,494, primarily for equipment.
Outlook, risks and unusual items
- Management said existing cash was expected to fund ordinary-course needs for at least the next 12 months. It expects R&D and G&A spending to rise and anticipates added sales and marketing costs as commercialization approaches. No specific revenue or earnings guidance was provided.
- COVID-19 delayed enrollment in the FACT-1 and FACT-2 trials. Interim results were expected in the second half of 2021, with final results approximately nine months later. Restrictions also reduced access to research tumor specimens and could slow R&D and prospective collaborations.
- Management expected to complete development of a RAS-signaling test for breast and ovarian cancer by year-end 2020. It reported preclinical ovarian cancer findings and expected to begin pharmaceutical-company collaboration discussions later in 2020; these were expectations, not completed milestones.
- In July 2020, Celcuity extended its Minneapolis office lease through April 2022, adding $197,211 to the operating lease right-of-use asset and liability. An additional one-year renewal option was not included in the lease term.
- The company established a $10 million at-the-market stock program in June 2020. It sold 14,901 shares at an average $10.34 per share during the first nine months; no shares were sold in Q3. The filing reports approximately $0.05 million of net proceeds through September 30.
- In May 2020, exercise prices on 203,750 employee stock options were modified to $5.10. The modification added approximately $70,000 of stock-based compensation for the first nine months and was expected to add approximately $149,000 over the remaining service period.
- Risks include clinical and regulatory uncertainty, dependence on future financing and pharmaceutical partnerships, market adoption and reimbursement uncertainty, and the possibility of further pandemic-related trial or operating disruption. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether cash runway remains adequate against the stated 12-month outlook, given the $5.04 million of operating cash used in the first nine months and expected expense growth.
- Enrollment and result timing for FACT-1 and FACT-2, and the impact of COVID-19 on trial sites and prospective collaborations.
- Progress and validation of the RAS-signaling test, ovarian cancer program, and other planned CELsignia tests.
- Commercial partnerships, regulatory pathway, reimbursement, and actual demand for CELsignia tests; the company had no revenue as of this filing.
- Potential dilution from the remaining ATM capacity, stock options, and equity compensation.