CNS Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; filed November 12, 2021. CNS is a clinical-stage pharmaceutical company focused on anti-cancer drug candidates. It reported no revenue and is funding research and development through equity financing.
Financial performance and position
| Metric | Q3 2021 / Sep. 30, 2021 | Comparable period / Dec. 31, 2020 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $3.81 million for Q3; $11.23 million for nine months | $2.01 million for Q3; $6.45 million for nine months in 2020 |
| Net loss | $3.81 million for Q3; $11.24 million for nine months | $2.01 million for Q3; $6.45 million for nine months in 2020 |
| Loss per share, diluted | $0.14 for Q3; $0.43 for nine months | $0.12 for Q3; $0.39 for nine months in 2020 |
| Cash and cash equivalents | $8.33 million | $14.04 million |
| Working capital | Approximately $8.75 million | Not separately stated |
| Total liabilities / notes payable | $2.41 million / $44,632 | $1.91 million / $439,294 |
| Operating cash used | $10.30 million for nine months | $5.87 million for nine months in 2020 |
Cash used in investing activities was $3,672; financing activities provided $4.59 million, principally from common-stock sales and warrant exercises. No meaningful revenue or profit margins are applicable. The filing reports no material capital-expenditure commitments.
Material changes versus prior periods
- Nine-month operating expenses rose to $11.23 million from $6.45 million, primarily reflecting research and development spending for drug manufacturing and Phase II trial preparation. R&D expense increased to $7.45 million from $3.15 million.
- Nine-month net loss widened to $11.24 million from $6.45 million. Cash used in operations increased to $10.30 million from $5.87 million.
- Cash declined by $5.71 million from year-end 2020. The company raised $4.65 million net through common-stock sales under its at-the-market sales agreement and received $332,750 from warrant exercises.
- Shares outstanding were 27,460,735 at September 30, 2021 and 27,920,967 at November 12, 2021.
Outlook, risks and unusual items
- Funding and going concern: Management said cash on hand was expected to fund operations into, but not beyond, the near term, and estimated runway into the second quarter of 2022. The company estimated it would need approximately $16 million to complete the Berubicin Phase II trial, about $2 million for near-term WP1244 preclinical work, and additional working capital. Management stated that substantial doubt exists about the company’s ability to continue as a going concern, and that additional financing is necessary.
- Clinical development: The Berubicin Phase II trial for glioblastoma was open for enrollment in Q2 2021 and treated its first patient in Q3. The planned study compares Berubicin with Lomustine, with 243 patients and 2:1 randomization; overall survival is the primary endpoint. The FDA granted Berubicin Fast Track Designation in July 2021. Trial timing and costs may change, and approval or commercial success is not assured.
- Related-party and collection risk: WPD, a related party, had not paid an invoiced $132,648 for Berubicin drug product. The filing says approximately $655,000 of delivered product was due, but the company did not record the remaining milestone amounts as a receivable because of collectability concerns and recorded a reserve that increased R&D expense. CNS said it was working with WPD to resolve the matter.
- Other commitments: The company accrued $600,000 for UTMDACC-sponsored research and $100,000 related to the start of Phase II clinical trials under its HPI license. Subsequent to quarter-end, it committed to purchase about $85,000 of manufacturing materials from HPI.
- Controls and legal matters: Management concluded disclosure controls were ineffective because of material weaknesses involving insufficient segregation of duties and lack of formal control documentation. The company reported no current legal proceedings.
- The filing provides no formal revenue or earnings guidance. Management expects R&D costs to increase as development activities expand. Key risks include financing needs, clinical and regulatory outcomes, third-party manufacturing, intellectual-property obligations, and reliance on related-party arrangements.
Key facts for investors to verify
- Whether CNS can raise the estimated funding needed for the Berubicin trial, WP1244 work, and ongoing operations before its projected cash runway expires.
- Berubicin trial enrollment, timing, costs, interim-analysis plans, and eventual results against the active comparator.
- Collection of the WPD amounts due, the reserve recorded, and validation of WPD’s development expenditures under its sublicense.
- Progress in remediating the disclosed internal-control material weaknesses.
- Potential dilution from future equity issuance, warrants, and options; the filing listed 5,130,240 warrants and 2,939,736 options outstanding at quarter-end.