Cingulate Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Cingulate is a pre-revenue biopharmaceutical company developing timed-release drug candidates, principally for ADHD. It has no products approved for sale and has not generated revenue.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $4.46m | $2.18m | $6.58m | $4.94m |
| General and administrative | $1.91m | $1.87m | $3.63m | $4.12m |
| Net loss | $6.62m | $4.04m | $10.62m | $9.04m |
| Basic and diluted loss per share | $0.57 | $0.36 | $0.92 | $0.80 |
| Cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $8.18m | $8.28m |
Q2 operating expenses increased 57% to $6.36m. R&D rose 105%, mainly due to CTx-1301 clinical activity and manufacturing; G&A was broadly flat. For the six months, R&D increased 33% while G&A declined 12%, primarily because of lower directors’ and officers’ insurance costs. Interest and other expense was $0.25m in Q2 and $0.41m for the half-year, mainly reflecting interest on the WFIA note. Margins are not meaningful for this pre-revenue company.
At June 30, cash and cash equivalents were $0.35m, versus $5.36m at December 31, 2022; current assets were $2.04m and current liabilities $10.99m. Total liabilities were $11.33m, including an $8.0m unsecured note payable to related party WFIA at 15% annual interest; accrued interest was $0.73m. The note is due August 2025 but includes a demand feature subject to notice. Stockholders’ equity was negative $6.10m, compared with positive $3.88m at year-end 2022. No income tax benefit was recorded.
Management said cash, together with post-quarter stock-sale proceeds and the WFIA private placement, was expected to fund operations only into September 2023. It estimated approximately $30m of additional capital would be needed, beyond the WFIA private-placement proceeds, to pursue a CTx-1301 NDA filing in the second half of 2024. The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance.
Material developments and outlook
- CTx-1301 clinical result: The Phase 3 adult dose-optimization study, completed in June, did not achieve statistical significance on its primary endpoint. The company reported a trend toward significance (PERMP p-value 0.089) in a 21-person study, alongside favorable effect-size and tolerability observations.
- Planned CTx-1301 work: A pivotal pediatric/adolescent fixed-dose Phase 3 study began in late July 2023 and a pediatric dose-optimization study began in early August; results were expected in Q1 2024. Subject to positive results, management expected to submit an NDA in H2 2024 under the 505(b)(2) pathway.
- Other candidates: CTx-2103 formulation results supported a planned FDA Pre-IND meeting in Q4 2023 and potential IND filing in Q1 2024. A CTx-1302 Phase 1/2 study was planned for mid-2024, subject to development progress.
- Financing and dilution: In May, WFIA provided an additional $3m, increasing its note to $8m. During Q2, common-stock sales under Lincoln Park and the ATM generated net proceeds of approximately $0.25m and $0.10m, respectively. After quarter-end, the company sold additional shares through these programs and issued 1,823,155 shares to WFIA on August 11 for approximately $1m gross. These financings dilute existing shareholders; future funding may require additional equity, debt, or partnerships.
- Nasdaq listing risk: Nasdaq granted an extension to November 13, 2023, to regain compliance with the minimum stockholders’ equity requirement, subject to milestones that include raising capital. The company also received a separate notice for failure to meet the $1.00 minimum bid price, with a compliance deadline of January 24, 2024. Delisting could impair liquidity and access to capital; a reverse split was among the options being considered.
- Other risks and items: Development, regulatory approval, manufacturing, financing availability, and commercialization remain uncertain. The company disclosed ordinary-course legal contingency procedures but no specific material legal proceeding in the supplied filing text. Management reported disclosure controls were effective at June 30, 2023, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether CTx-1301’s upcoming pediatric Phase 3 trials meet endpoints and support the stated NDA timetable, particularly given the non-significant adult-study primary result.
- Actual cash runway, spending, and the availability and terms of additional capital; the filing identifies a going-concern uncertainty and an estimated $30m funding need for the CTx-1301 NDA objective.
- Nasdaq compliance progress and the potential effects of further share issuance or a reverse stock split.
- The WFIA note’s 15% rate, demand provisions, accrued interest, and related-party status.
- Post-quarter Lincoln Park proceeds are inconsistent within the filing: one disclosure reports $196,167 net, while another reports $169,167. Verify the correct amount; the reported ATM proceeds are $1,595,429 net.