Cellectar Biosciences, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Cellectar is a clinical-stage biopharmaceutical company developing cancer therapies using its phospholipid drug conjugate platform. It had no product revenue and reported operating expenses rather than sales.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $2.31 million | $2.12 million; up 8% |
| General and administrative expense | $1.32 million | $1.33 million; relatively unchanged |
| Operating loss | $3.63 million | $3.45 million |
| Net loss | $3.62 million | $3.48 million |
| Basic and diluted loss per share | $0.76 | $2.07 |
| Cash used in operating activities | $2.82 million | $3.18 million |
| Cash, cash equivalents and restricted cash at period-end | $10.49 million | $6.88 million |
Cash and cash equivalents declined from $13.26 million at December 31, 2018; the prior-year cash-flow statement reported $10.06 million at the start of Q1 2018. The 2019 operating cash outflow was partly offset by working-capital movements, including a $511,000 increase in accounts payable and accrued liabilities. Investing and financing cash outflows were $6,000 and $1,000, respectively.
Total assets were $12.55 million and total liabilities were $2.70 million at March 31, 2019. Liabilities included $598,000 in lease liabilities and a $47,000 derivative warrant liability; the filing reports no material conventional borrowings. The company had $9.85 million of stockholders’ equity and an accumulated deficit of $101.21 million. Profitability and margins are not meaningful because the company had no reported revenue.
Changes and notable developments
- R&D expense increased $184,000, primarily from pediatric-study startup costs and higher manufacturing-related costs as clinical enrollment increased; preclinical costs declined as studies concluded.
- Cash used in operations decreased by about $369,000 year over year, while net loss increased by about $146,000.
- Common shares outstanding increased to 5.09 million from 4.73 million at year-end, largely reflecting conversion of Series C preferred shares. At March 31, 5.32 million warrants were outstanding; potential dilution is substantial relative to common shares outstanding.
- The company adopted lease accounting standard ASC 842 on January 1, 2019, recording a right-of-use asset of approximately $392,000 and lease liabilities of approximately $598,000 at quarter-end. Management said adoption had no material net impact on the statement of operations.
Outlook, operations and risks
- Management said the March 31 cash balance was expected to fund budgeted operations into the first quarter of 2020. Operations beyond then depend on additional equity or debt financing, a strategic transaction, or other funding. The filing states there is substantial doubt about the company’s ability to continue as a going concern; no assurance is given that financing will be available on acceptable terms or in time.
- The company expects operating losses to continue for the foreseeable future and has no products on the market. It may need to delay, reduce or discontinue development programs if it cannot raise capital.
- CLR 131 is being evaluated in Phase 1 and Phase 2 studies. The company reported preliminary Phase 2 multiple-myeloma results of a 30% overall response rate among the first 10 evaluable patients and said it expanded that cohort. These are interim clinical findings, not evidence of regulatory approval or commercial success. A pediatric Phase 1 study began in Q1 2019; management anticipated an independent review of Phase 1 cohort 6 data by the end of Q2 2019 and further Phase 2 data later in 2019.
- The FDA granted exemptions from the import alert affecting sole CLR 131 supplier CPDC for the company’s hematology and pediatric INDs, allowing enrollment in ongoing and planned trials. Dependence on a sole supplier remains a risk.
- Other risks include clinical and regulatory uncertainty, continued cash burn, financing and dilution needs, and the possibility of relinquishing economic or intellectual-property rights in collaborations. The company reported no legal proceedings expected to materially affect its financial statements. Management said disclosure controls were effective and there were no significant changes in internal control over financial reporting.
Important facts for investors to verify
- Whether financing is secured before the stated cash runway ends and on what terms, including potential dilution or senior claims.
- Actual cash burn against budget and the assumptions underlying management’s runway estimate.
- Updated CLR 131 trial enrollment, response durability, safety, cohort results and timing; preliminary response rates are based on small patient groups.
- Reliability and continuity of CLR 131 supply from CPDC despite the import-alert exemptions.
- Potential dilution from outstanding warrants, preferred-share conversions and other equity awards.