Celcuity Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Celcuity is a clinical-stage biotechnology company developing its CELsignia diagnostic platform and targeted cancer therapies. It has not generated revenue and has incurred losses since inception.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $13.07 million | $1.77 million | $15.31 million | $3.61 million |
| General and administrative expense | $0.57 million | $0.45 million | $1.13 million | $0.91 million |
| Total operating expenses | $13.64 million | $2.21 million | $16.44 million | $4.52 million |
| Net loss | $14.03 million | $2.20 million | $16.82 million | $4.45 million |
| Net loss per share, basic and diluted | $1.11 | $0.21 | $1.42 | $0.43 |
| Cash used in operating activities | Not separately stated | Not separately stated | $10.14 million | $3.39 million |
With no revenue, operating margins are not meaningful. At June 30, cash and cash equivalents were $41.64 million, total assets $42.81 million, current liabilities $1.54 million, and stockholders’ equity $27.03 million. Accumulated deficit was $43.15 million. The company reported $15.77 million of total liabilities, including $14.23 million carrying value of long-term debt.
Changes versus prior comparable periods
- Q2 net loss increased by $11.83 million year over year; six-month net loss increased by $12.38 million.
- R&D expense rose sharply, principally due to a $10 million upfront Pfizer license expense for gedatolisib, consisting of $5 million cash and $5 million in issued common shares. Other increases reflected compensation, clinical validation, laboratory work, patent costs, and operational and business-development activity.
- Six-month operating cash use increased to $10.14 million from $3.39 million. Financing provided $40.20 million, chiefly from the February follow-on offering and Innovatus loan; cash increased by $30.00 million over the period.
- Interest expense was $0.39 million for the first half of 2021, versus nominal expense in the prior-year period, reflecting the April loan.
Financing, outlook, and material developments
- Debt: In April, Innovatus funded a $15 million term A loan under a facility permitting up to $25 million in three tranches. The additional $10 million is milestone-dependent. The loan is secured by substantially all company assets, has an effective interest rate of 11.36%, and allows interest-only payments for 36 months, potentially 48 months if conditions are met. It matures five years after initial funding. Innovatus also received a warrant; the agreement includes covenants, default provisions, and a minimum-cash requirement.
- Subsequent equity financing: On July 1, 2021, Celcuity sold 2.25 million shares at $25 per share, generating approximately $56.3 million gross, before approximately $3.5 million in underwriting discounts and offering expenses. This was not included in June 30 cash.
- Management liquidity view: Management stated that June 30 cash was expected to fund operations and obligations for at least 12 months, based on its current business plan. It expects R&D and G&A spending to rise as it advances CELsignia and gedatolisib, clinical trials, and potential commercialization. Management may seek additional capital; availability and terms are uncertain.
- Clinical and product outlook: Celcuity licensed global rights to gedatolisib from Pfizer in April and reported preliminary Phase 1b results in ER+/HER2-negative metastatic breast cancer. The company intends, subject to FDA feedback, to start a Phase 2/3 trial with palbociclib and endocrine therapy in the first half of 2022. It is collaborating on five Phase II trials of partner therapies in patients selected using CELsignia tests.
- Pfizer obligations: The license included the $10 million upfront consideration and provides for development and commercial milestone payments of up to $335 million in aggregate, plus tiered royalties in the low-to-mid teens on gedatolisib sales.
- Risks and contingencies: COVID-19-related enrollment delays pushed expected interim results for FACT-1 and FACT-2 to late 2021 or early 2022; further delays remain possible. Key risks include clinical and regulatory outcomes, commercialization and reimbursement uncertainty, partner relationships, competition, financing needs, and the ability to develop and commercialize gedatolisib and CELsignia tests. Future milestone payments under the Pfizer license depend on achievement of specified events.
- Other items: Celcuity extended its Minneapolis office lease through April 2023. It reported no legal proceedings expected to have a material adverse effect and stated that disclosure controls were effective.
Important facts for investors to verify
- Cash runway and the minimum-cash covenant after including July’s offering proceeds and expected clinical-development spending.
- Loan terms, milestone conditions for the remaining $10 million, conversion rights, and the cost of debt over time.
- Timing, enrollment, efficacy, and safety updates for gedatolisib and the five CELsignia-supported trials, including COVID-19 effects.
- Pfizer milestone and royalty obligations and the regulatory and commercial requirements for gedatolisib and companion diagnostics.
- Whether expense growth and dilution from equity awards, offerings, and warrants align with progress toward clinical and commercial milestones.