Lantern Pharma Inc. 10-Q Summary
Business Context and Reporting Period
Lantern Pharma Inc. is a clinical-stage biotechnology company developing targeted oncology therapies using its artificial intelligence and machine-learning RADR platform, which management states includes more than 25 billion data points. The company has four drug candidates and an antibody-drug conjugate program.
This unaudited Form 10-Q covers the three months ended March 31, 2023, and was filed May 9, 2023. Lantern had 10,857,040 common shares outstanding as of May 3, 2023.
- LP-300: Phase II Harmonic trial in never-smoker patients with advanced non-small cell lung cancer.
- LP-100: Clinical development focused on combination treatment with PARP inhibitors.
- LP-184: Pre-IND development, with a planned Phase I trial targeted for mid-2023.
- STAR-001: The name used for LP-184 in central nervous system and brain cancer indications following formation of Starlight Therapeutics in January 2023.
- LP-284: Pre-IND development, with a planned Phase I trial later in 2023.
- ADC program: Research and optimization stage.
Financial Metrics
| Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $1.733 million | $1.406 million |
| Research and development expense | $2.553 million | $2.660 million |
| Total operating expenses | $4.286 million | $4.066 million |
| Loss from operations | $(4.286) million | $(4.066) million |
| Interest income | $134 thousand | $22 thousand |
| Other income (expense), net | $285 thousand | $(78) thousand |
| Net loss | $(3.868) million | $(4.122) million |
| Basic and diluted loss per share | $(0.36) | $(0.38) |
| Net cash used in operating activities | $(3.757) million | $(3.328) million |
Profit margins are not meaningful because the company generated no revenue and remains loss-making. Cash, cash equivalents and restricted cash totaled $33.020 million at March 31, 2023. Cash and cash equivalents were $32.479 million, and marketable securities were $19.061 million. Working capital was approximately $52.374 million.
Total assets were $55.509 million and total liabilities were $2.934 million at March 31, 2023. The company reported no long-term debt. Operating lease liabilities totaled $260 thousand, including $120 thousand classified as current.
Material Changes Versus the Prior Comparable Period
- Net loss improved by approximately $254 thousand, or 6%, primarily because of higher interest income and a shift from other expense to other income.
- General and administrative expense increased approximately $327 thousand, or 23%, due mainly to higher professional fees, payroll and compensation, and travel costs.
- Research and development expense decreased approximately $107 thousand, or 4%. Lower manufacturing costs and licensing fees, including a nonrecurring Allarity-related expense in 2022, were partly offset by higher research studies and payroll costs.
- Operating cash use increased approximately $429 thousand to $3.757 million, largely because the prior-year period benefited from increases in accounts payable and accrued expenses.
- Investing activities used $961 thousand in 2023, compared with $177 thousand provided in 2022, primarily reflecting purchases of marketable securities.
- There was no financing cash flow in 2023. In 2022, financing activities used $2.182 million, primarily for share repurchases.
- Cash, cash equivalents and restricted cash declined $4.723 million during the quarter, compared with a $5.331 million decline in the prior-year quarter.
- Marketable securities increased from $17.994 million at December 31, 2022, to $19.061 million at March 31, 2023. The portfolio had $869 thousand of unrealized losses, which management did not consider credit losses.
Guidance, Outlook, Risks and Unusual Items
Management expects operating and research and development expenses, and therefore operating losses, to increase as it advances LP-300, initiates planned trials for LP-184 and LP-284, continues LP-100 development, and expands other programs. The filing does not provide quantitative earnings or cash-burn guidance.
Management believes cash and cash equivalents as of March 31, 2023, together with anticipated expenditures and capital commitments, will fund operating expenses and capital requirements for at least 12 months from the filing date. However, the company expects to require substantial additional funding to complete clinical trials. Additional equity financing could dilute existing shareholders, while debt financing could create fixed payment obligations and restrictive covenants.
- The company has not achieved product revenue or profitability and may never do so.
- Clinical trials, regulatory approvals, enrollment, manufacturing, competition and commercial viability create substantial uncertainty.
- Failure to raise capital could require delaying, reducing or discontinuing programs or licensing rights on less favorable terms.
- Marketable securities are exposed to interest-rate and market-value risk; substantially all bank cash balances exceeded FDIC insurance limits.
- The company remains exposed to foreign-currency risk through its Australian subsidiary and reported approximately $38 thousand of foreign-currency losses in the quarter.
- Future research, licensing, strategic alliance and service-provider obligations will vary with clinical and development activity. Approximately $1.248 million was expensed under such agreements during the quarter.
- The company formed Starlight Therapeutics to advance CNS and brain cancer applications of LP-184, now referred to as STAR-001 for those indications.
- Management stated that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Whether the planned mid-2023 LP-184 Phase I trial and later-2023 LP-284 Phase I trial began on schedule and obtained required regulatory clearances.
- Progress, enrollment and clinical results for the LP-300 Harmonic Phase II trial.
- Cash burn, marketable-securities liquidity and the timing and terms of any future capital raise.
- Whether the reported cash runway remains at least 12 months as development spending increases.
- Potential dilution from future equity financing, outstanding options for 1,095,046 shares and warrants for 177,998 shares.
- Terms and continuation of the Actuate collaboration, which expired March 31, 2023 and was under discussion for extension; no revenue had been recognized through the filing date.
- Exposure to unrealized investment losses, interest-rate changes and uninsured cash balances.