SELLAS Life Sciences Group, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. SELLAS is a clinical-stage biopharmaceutical company developing cancer therapies; it reported no product sales.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Licensing revenue | $0 | $1.9 million | $1.0 million | $7.6 million |
| Research and development | $5.5 million | $3.5 million | $10.1 million | $7.7 million |
| Acquired in-process R&D | $0 | $0 | $10.0 million | $0 |
| Operating loss | $8.6 million | $4.5 million | $25.4 million | $6.7 million |
| Net loss | $8.4 million | $4.6 million | $25.2 million | $7.0 million |
| Net loss per share | $0.41 | $0.30 | $1.39 | $0.47 |
At June 30, 2022, cash and cash equivalents were $27.0 million and restricted cash was $0.1 million. Current liabilities were $12.2 million, including a $5.5 million payable for the GFH009 license; total liabilities were $13.2 million. The filing reports no outstanding borrowings or debt balance. Stockholders’ equity was $19.1 million and accumulated deficit was $163.8 million.
For the first six months, operating cash outflow was $12.9 million, investing cash outflow was $4.5 million, and financing cash inflow was $23.0 million. Cash, cash equivalents and restricted cash increased by $5.6 million. The filing does not provide a clear gross-margin measure; licensing revenue is not product revenue.
Changes versus comparable periods
- Q2 licensing revenue fell by $1.9 million to zero; six-month revenue declined by $6.6 million. The 2022 six-month revenue was a $1.0 million milestone from 3DMed, while the 2021 comparison largely reflected recognition of the initial 3DMed license transaction price.
- Q2 R&D expense increased $2.1 million, primarily from GPS manufacturing, REGAL trial costs and personnel. Six-month R&D increased $2.4 million.
- The $10.0 million GFH009 license fee was expensed as acquired in-process R&D in the first half; $4.5 million was paid and $5.5 million remained payable.
- Six-month net loss widened by $18.1 million, reflecting the license expense, higher R&D and lower licensing revenue. The company raised approximately $23.0 million net in an April public offering, issuing 4.63 million shares and warrants to purchase the same number of shares.
Outlook, risks and notable items
- Liquidity and going concern: Management states that available cash is not expected to fund planned operations for at least 12 months from issuance of the financial statements, raising substantial doubt about the company’s ability to continue as a going concern. Additional financing is needed; the company may have to scale back or pause activities. A sales agreement permits up to $40.5 million of additional gross equity sales, but future financing is not assured.
- GPS: Management expected REGAL Phase 3 enrollment to complete in early 2023 and its event-driven interim analysis after 80 deaths by the end of the first half of 2023, subject to enrollment, survival and pandemic assumptions. Enrollment challenges and COVID-related site delays could alter timing. Final data from the GPS/pembrolizumab ovarian cancer study were expected by year-end 2022.
- GFH009: The licensed CDK9 inhibitor was in Phase 1. Management expected planned dose cohorts to complete by year-end 2022, a Phase 2 AML combination trial to begin by the end of Q2 2023, and a pediatric sarcoma study to start in late 2022 or early 2023. These are plans, not assured outcomes. The agreement also includes up to $48 million in development and regulatory milestones, up to $92 million in sales milestones, and tiered royalties.
- Other risks and contingencies: Clinical and regulatory success is uncertain; COVID-19, site staffing, supply-chain disruption, inflation and labor shortages may delay development. SELLAS is seeking to out-license NPS and does not plan to fund further NPS development. No pending or threatened litigation was reported at June 30, 2022. Potential 3DMed milestones of up to $191.5 million remained contingent and outside the company’s control.
Investor verification priorities
- Assess the stated going-concern shortfall, expected cash runway and the timing and availability of additional financing.
- Check subsequent REGAL enrollment and interim-analysis timing against the assumptions disclosed in this filing.
- Verify GFH009 trial progress, planned study start dates and funding obligations under the GenFleet license.
- Review dilution exposure: the April offering warrants and other outstanding warrants, options and restricted stock units.
- Distinguish contingent licensing milestones and royalties from recognized revenue and cash actually received.