SELLAS Life Sciences Group, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. SELLAS is a clinical-stage oncology biopharmaceutical company with no approved products and no product-sales revenue. Its lead candidate is GPS, a WT1-targeting immunotherapy; GFH009, a CDK9 inhibitor, was added through a 2022 license.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| License revenue | $1.0 million | $7.6 million |
| Research and development | $20.3 million | $15.7 million |
| General and administrative | $12.6 million | $11.3 million |
| Acquired in-process R&D expense | $10.0 million | — |
| Operating loss | $42.0 million | $25.3 million |
| Net loss | $41.3 million | $20.7 million |
| Net loss per share, basic and diluted | $2.13 | $1.34 |
| Cash used in operating activities | $23.8 million | $26.0 million |
Revenue was licensing revenue from the 3D Medicines agreement, not product sales. The 2022 revenue reflected a $1.0 million China IND milestone; 2021 included recognition of the initial license transaction price. The larger net loss mainly reflected lower license revenue, higher R&D and the $10.0 million GFH009 in-process R&D charge, partly offset by no repeat of the prior-year $5.7 million NPS impairment.
At December 31, 2022, cash and cash equivalents were $17.1 million ($17.2 million including restricted cash), total assets were $20.9 million, total liabilities were $16.1 million, and stockholders’ equity was $4.9 million. The balance sheet reports no conventional borrowings; it includes a $5.5 million payable for the GFH009 license fee. No profit margin is meaningful given the company’s development-stage status and lack of product sales.
Cash declined by $4.2 million during 2022 after $24.1 million of financing inflows, principally the April 2022 equity-and-warrant offering. The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, and management said year-end cash would not fund planned operations for at least 12 months from issuance of the financial statements. A February 2023 public offering subsequently raised approximately $18.5 million net, excluding warrant exercises. Management also expected $13.0 million in 3D Medicines milestones in the first half of 2023; those contingent payments were excluded from the going-concern assessment.
Material changes and business developments
- Net loss nearly doubled year over year, while license revenue fell $6.6 million. R&D expense rose $4.6 million, primarily due to REGAL trial costs, personnel and consulting.
- SELLAS licensed GFH009 from GenFleet in March 2022. The agreement includes a $10.0 million initial fee, up to $48.0 million in development and regulatory milestones, up to $92.0 million in sales milestones, and tiered royalties. Of the initial fee, $5.5 million remained payable at year-end.
- SELLAS raised approximately $23.0 million net in the April 2022 offering and sold shares through its ATM facility. The February 2023 offering added approximately $18.5 million net and included warrants, increasing potential share dilution.
- Common shares outstanding rose from 15.9 million at year-end 2021 to 21.0 million at year-end 2022. As of March 15, 2023, 28.3 million shares were outstanding.
Pipeline, outlook and key risks
- GPS / REGAL: The Phase 3 randomized, open-label AML maintenance trial compares GPS with best available treatment; overall survival is the primary endpoint. The independent monitoring committee recommended continuation without modifications after its December 2022 risk-benefit review. Management expected the 60-death interim analysis by late 2023 or early 2024 and the 80-death final analysis by late 2024; timing is event-driven and uncertain. Participation by 3D Medicines is expected to add about 20 patients in China and trigger $13.0 million in milestones.
- Other GPS studies: November 2022 topline data from the 17-evaluable-patient ovarian cancer study of GPS plus pembrolizumab reported median overall survival of 18.4 months and median progression-free survival of 12 weeks. These were non-randomized results compared with a separate similar-population study, not a direct controlled comparison; final data were expected in the first half of 2023. Enrollment in the GPS/nivolumab mesothelioma study was completed at year-end 2022, with topline data expected in the first half of 2023.
- GFH009: The Phase 1 dose-escalation study was ongoing in AML and lymphoma, among other indications. December 2022 preliminary results included one confirmed complete remission, MRD-negative, in an AML patient previously treated with azacitidine and venetoclax; two other AML patients had at least a 50% decrease in marrow blasts. The company planned to report analyzed Phase 1 data and select a Phase 2 dose in early Q2 2023, then begin a combination Phase 2a AML study. These are preliminary, early-stage findings, not evidence of established efficacy.
- Management anticipated rising R&D spending as GPS and GFH009 trials advanced. It stated that additional financing would be required; planned funding sources included equity or debt, the ATM, and potential partnerships, with no assurance those sources would be available on acceptable terms.
- Key risks include clinical-trial failure or delay, patient enrollment, regulatory approval, financing needs and dilution, reliance on single-source and other third-party manufacturers and clinical vendors, license compliance, intellectual property protection, competition, reimbursement and drug-pricing pressures, and potential disruption from COVID-19 or geopolitical and financial-market conditions. Most operations depend on external contractors; the company reported no commercial manufacturing capacity.
- The company reported no pending or threatened litigation it believed would materially affect it. Management concluded internal control over financial reporting was effective as of December 31, 2022; the auditor did not attest to that assessment.
Important facts for investors to verify
- Whether the February 2023 financing, ATM activity and any subsequent funding provide adequate operating runway, and how much dilution results from outstanding and newly issued warrants.
- Whether and when the expected $13.0 million 3D Medicines milestones were received, and whether the China trial participation or future contingent payments changed.
- REGAL enrollment and event accrual, the interim and final analysis timing, and the eventual results against the randomized control arm.
- Final, fully analyzed GPS combination-study results and whether they support the preliminary comparisons cited by management.
- GFH009’s final Phase 1 safety, dose-selection and efficacy data, and progress and results from any subsequent Phase 2 studies.
- Current cash burn, outstanding license obligations and milestone commitments, and the status of the auditor’s going-concern concern.