Unicycive Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unicycive is a clinical-stage biotechnology company developing Oxylanthanum Carbonate for hyperphosphatemia in chronic kidney disease and UNI 494 for acute kidney injury. It had no product sales; revenue was from licensing.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Losses and expenses are shown as reported.
| Metric | Q3 2022 | Q3 2023 | Nine months 2022 | Nine months 2023 |
|---|---|---|---|---|
| Licensing revenue | $0.951 | $0 | $0.951 | $0.675 |
| Research and development | $4.803 | $3.372 | $8.596 | $8.669 |
| General and administrative | $1.702 | $2.566 | $5.082 | $6.467 |
| Operating loss | $(5.554) | $(5.938) | $(12.727) | $(14.461) |
| Net loss | $(5.557) | $(4.333) | $(12.730) | $(22.746) |
| Net loss per share, basic and diluted | $(0.37) | $(0.13) | $(0.85) | $(1.12) |
| Operating cash used | — | — | $(9.567) | $(13.844) |
- Margins: Not meaningful to assess as the company reported no product sales and only licensing revenue.
- Cash and current assets: Cash and equivalents were $14.345 million at September 30, 2023, versus $0.455 million at December 31, 2022; current assets were $18.569 million.
- Liabilities: Current liabilities were $15.456 million, including an $11.528 million warrant liability. Total liabilities were $16.008 million. Operating lease liability was $0.866 million; the filing reports no conventional borrowings outstanding at quarter-end.
- Cash flows and financing: Nine-month investing cash use was $0.012 million; financing provided $27.746 million, primarily from the March private placement. Cash increased by $13.890 million over the period.
- Share count: Common shares outstanding rose from 15.232 million at year-end 2022 to 34.754 million at September 30, 2023. The filing reports 34,754,401 shares issued and outstanding as of November 14, 2023.
Material changes versus comparable periods
- Q3 licensing revenue fell to zero from $0.951 million, which had been recognized for the Lee’s Pharmaceutical agreement in 2022. Nine-month licensing revenue was $0.675 million, recognized from the Lotus agreement, versus $0.951 million in 2022.
- Q3 R&D expense declined 30%, mainly as significant prior-period preclinical work was completed; nine-month R&D was nearly unchanged. Nine-month G&A rose 27%, primarily due to higher consulting and professional services costs.
- Q3 net loss was lower than the prior-year quarter, partly reflecting a $1.396 million warrant fair-value gain and $0.227 million of interest income. For the nine months, net loss increased to $22.746 million, including an $8.697 million noncash warrant fair-value expense.
- The March 2023 preferred-stock financing generated approximately $28.0 million net proceeds. After shareholder approval, Series A-1 preferred stock converted in July into common stock and Series A-2 preferred stock; the conversion included issuance of warrants to purchase up to 160.958 million preferred shares across three tranches.
Outlook, risks and unusual items
- Management expects continued operating losses and negative operating cash flows, with expenses likely to rise as development, regulatory and potential commercialization work advances. The filing states the company expects to need funding by the second half of 2024 and concludes there is substantial doubt about its ability to continue as a going concern for one year after the financial statements became available to be issued.
- The scope and cost of a clinical trial required following recent FDA feedback remained uncertain. Management said it expected clarifying FDA feedback in fall 2023; this filing does not report the outcome.
- Further financing may be needed. If unavailable on acceptable terms, the company may need to delay or reduce development programs, or seek collaborations that could require giving up rights. The March financing documentation describes potential additional gross proceeds of up to $130 million through conditional warrant exercises; this is not assured funding.
- The $11.528 million warrant liability is a Level 3 fair-value estimate dependent on unobservable assumptions, including probabilities of FDA/TDAPA approval and commercialization. Changes in its value affect reported earnings and are not equivalent to operating cash flows.
- Series A preferred stock carries an 8% cumulative annual dividend under the terms described in the filing. The company recorded $0.867 million of deemed dividends for the nine months, reducing earnings attributable to common shareholders.
- Disclosure controls and internal control over financial reporting were judged ineffective due to a material weakness involving accounting staffing, expertise, review and segregation of duties. Management was taking remediation steps and expected completion by the end of Q2 2024, with additional costs expected.
- The company reported no pending material legal proceedings and no material changes to the risk factors in its 2022 Form 10-K. No subsequent events were reported.
Most important facts for investors to verify
- Whether additional financing is secured before the stated second-half 2024 funding need, and the assumptions underlying the going-concern assessment.
- The FDA’s clarified clinical-trial requirements, expected cost and timing for Oxylanthanum Carbonate and UNI 494, and any resulting changes to development plans.
- The terms, exercise conditions and potential dilution associated with the preferred-stock warrants and cumulative preferred dividends.
- The warrant-liability valuation assumptions and the effect of future remeasurement on reported results.
- Progress against the internal-control remediation plan and whether controls become effective by the stated target.