Celcuity Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; balance-sheet comparisons are to December 31, 2018. Celcuity is a pre-revenue cellular analysis company developing CELx cancer diagnostic tests, including tests intended to guide targeted therapy selection.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparator |
|---|---|---|
| Revenue | $0; no revenue generated to date | $0 |
| Research and development expense | $1.591 million | $1.546 million |
| General and administrative expense | $0.384 million | $0.531 million |
| Total operating expenses / operating loss | $1.975 million / $(1.975) million | $2.076 million / $(2.076) million |
| Interest and other income, net | $0.129 million | $0.108 million |
| Net loss | $(1.846) million; $(0.18) per share | $(1.968) million; $(0.19) per share |
| Operating cash flow | $(1.590) million | $(1.448) million |
| Cash, cash equivalents and investments | $23.424 million at March 31, 2019 | $24.898 million at December 31, 2018 |
| Total assets / total liabilities | $24.941 million / $1.077 million | $26.032 million / $0.682 million |
Margins are not meaningful because the company had no revenue. Cash and cash equivalents were $14.724 million, and short-term investments were $8.700 million. Investment securities mature in 2019. Lease liabilities totaled approximately $0.383 million; the filing reports no material conventional borrowing. The company reported an accumulated deficit of $11.334 million for Celcuity Inc. and a combined deficit of approximately $12.6 million under Celcuity LLC.
Changes versus the prior comparable period
- Net loss improved by approximately $0.122 million, or 6%; operating expenses declined 5%.
- R&D expense rose 3%, primarily due to increased patent-related legal costs and operational and business-development activity. G&A expense declined 28%, primarily because of lower non-cash stock-based compensation.
- Operating cash use increased approximately $0.142 million. Cash and investments declined approximately $1.474 million from year-end.
- At January 1, 2019, Celcuity adopted the new lease standard and recorded operating lease right-of-use assets and liabilities. Management said adoption did not affect Q1 earnings or cash flows.
Outlook, commentary and risks
- Management expects current cash resources to fund operations and obligations for at least the next 24 months, based on its current business plan. It expects R&D and G&A spending to increase, with additional sales and marketing costs as commercialization approaches. Future financing may be needed; availability and terms are uncertain and could dilute shareholders or impose restrictive terms.
- Management expected interim results from the Genentech/NSABP breast-cancer trial in late 2019 and final results about nine months later. The Puma/West Cancer Center trial was activated in early 2019, with interim results expected in late 2019 or early 2020 and final results about 12 months later. These are forward-looking estimates, not guaranteed outcomes.
- Celcuity has not established commercial revenue. Key risks include clinical and regulatory success, test adoption and reimbursement, competition, partner relationships, financing needs, and intellectual-property protection.
- A clinical research agreement may require up to approximately $2.690 million in additional milestone payments; another study agreement includes approximately $150,000 of future milestone payments.
- Disclosure controls and procedures were assessed as ineffective at March 31, 2019, due to previously identified limited segregation of duties. Management nevertheless stated that the financial statements fairly present the company’s position and results in all material respects. No material litigation or off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Whether cash burn, clinical-trial costs and the stated 24-month cash runway remain consistent with current plans and enrollment progress.
- Trial timelines, results and the ability to secure pharmaceutical partnerships and commercial adoption for CELx tests.
- Whether the ineffective disclosure controls are remediated and whether any future financing is required.
- The timing and amount of clinical-study milestone obligations and potential effects on liquidity.