CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Three months ended December 31, 2020, the company’s fiscal first quarter. The filing was signed February 12, 2021. CEL-SCI is a development-stage biotechnology company; it reported no product revenue.
Financial performance and position
| Metric | Three months ended Dec. 31, 2020 | Prior-year period / comparison |
|---|---|---|
| Grant income | $0 | $35,506 |
| Research and development expense | $5.415 million | $4.253 million |
| General and administrative expense | $3.316 million | $2.639 million |
| Operating loss | $8.731 million | $6.856 million |
| Net loss | $7.937 million | $5.531 million |
| Net loss available to common shareholders | $8.023 million; $0.21 per share | $5.531 million; $0.16 per share |
| Cash used in operating activities | $3.828 million | $4.102 million |
| Cash used in investing activities | $3.150 million | $0.110 million |
| Cash provided by financing activities | $13.329 million | $5.150 million |
At December 31, 2020, cash and cash equivalents were $21.860 million, versus $15.509 million at September 30, 2020. Current assets were $23.698 million and current liabilities $7.334 million. Total liabilities were $20.778 million; finance lease obligations were approximately $12.621 million and operating lease obligations approximately $2.199 million. The filing does not report conventional borrowings as a separate debt balance. No meaningful revenue-based margin can be calculated because the company had no revenue.
Material changes and notable items
- Operating expenses rose 27% year over year. R&D increased about $1.2 million, including higher Phase 3 study costs and employee stock compensation; G&A increased about $0.7 million, primarily due to employee stock compensation.
- Cash rose by $6.352 million during the quarter, mainly reflecting approximately $13.6 million of common-stock proceeds and warrant and option exercises, partly offset by operating cash use and facility and equipment expenditures. The December public offering sold 1 million shares at $14.65 per share.
- Property and equipment purchases were $3.150 million. The company reported approximately $3.6 million of manufacturing-facility upgrade costs during the quarter; total estimated upgrade costs were $10.5 million, with approximately $6.7 million incurred to date. The landlord contingently agreed to finance the final $2.4 million, repayable through increased lease payments.
- A $0.933 million gain on derivative instruments and $0.122 million in other non-operating gains reduced the reported net loss; these are not operating revenue. An $85,779 warrant-modification charge increased the loss attributable to common shareholders.
- Common shares outstanding increased to 39.767 million from 38.730 million at September 30, 2020. The company reported approximately $3.9 million received from option and warrant exercises between January 1 and February 5, 2021.
Outlook, risks and contingencies
- The Phase 3 Multikine head-and-neck cancer study had enrolled 928 patients and reached the required 298 events. The database was locked and final statistical analysis was underway; the company remained blinded and gave no results or timing date in this filing. Multikine is investigational and has not been approved; its safety and efficacy are not established.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring operating losses and future liquidity needs. Additional capital will be required; financing may not be available on acceptable terms or at all, and operations could be curtailed if funds cannot be raised.
- The company estimated another approximately $5.1 million of Phase 3 costs, excluding related costs such as drug manufacturing, and cautioned that actual costs could be higher. Ergomed had contributed approximately $11.3 million of up to $12 million in discounted services under a co-development and revenue-sharing arrangement.
- COVID-19’s full effect on financial condition, liquidity and operations remained uncertain. The company also cited uncertainty around completing development, obtaining regulatory approvals and generating future product revenue.
- Disclosure controls and internal control over financial reporting were assessed as not effective. A material weakness involved an understated finance lease right-of-use asset and equity at adoption of lease accounting; the December 2019 quarter was restated. Management described planned remediation, including additional lease reviews, outside specialists and training.
- Related-party warrant extensions included warrants held by a trust of which the CEO is a beneficiary and warrants held by company officers. The related incremental costs were recorded as a deemed dividend or interest expense, as applicable.
Important facts for investors to verify
- Final Phase 3 statistical results, their timing, and any subsequent regulatory plans for Multikine.
- Cash burn, remaining clinical and manufacturing costs, and the timing and terms of future financing.
- Actual manufacturing-facility upgrade costs, completion schedule, and final lease amendment and repayment terms.
- Progress in remediating the material weakness and effectiveness of controls in subsequent filings.
- Potential dilution from future equity offerings, warrant and option exercises, and outstanding equity awards.