CEL-SCI Corporation — FY2020 Form 10-K
Reporting period: Fiscal year ended September 30, 2020; comparison is FY2019. CEL-SCI is a clinical-stage biotechnology company with no approved products and no product-sales revenue.
Business context and development
- Lead candidate Multikine is in a global Phase 3 trial for newly diagnosed advanced primary head and neck cancer. The trial enrolled 928 patients; the required 298 deaths occurred in late April 2020, and the study was in final statistical analysis. The company remained blinded to results.
- Other programs are earlier-stage: LEAPS candidates for rheumatoid arthritis and experimental LEAPS COVID-19 candidates. The reported COVID-19 findings were from animal studies, not human trials.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Grant income | $0.56 million | $0.46 million |
| Research and development expense | $17.84 million | $12.66 million |
| General and administrative expense | $11.70 million | $8.00 million |
| Operating loss | $28.99 million | $20.20 million |
| Net loss | $30.26 million | $22.13 million |
| Net loss per common share | $0.82 | $0.71 |
| Net cash used in operating activities | $15.28 million | $16.32 million |
- There was no product revenue; grant income was the only reported operating income. Profitability and operating margins are not meaningful given the absence of product sales and continuing losses.
- Cash and cash equivalents at year-end were $15.51 million, up from $8.44 million. FY2020 cash use included $2.69 million for property, equipment and patents. Financing provided $25.04 million, chiefly from stock sales and warrant exercises.
- At September 30, 2020, current assets were $17.70 million and current liabilities were $4.27 million. Total liabilities were $20.81 million, including $12.69 million of finance lease obligations, $1.25 million of operating lease obligations, and $3.77 million of derivative liabilities.
- CEL-SCI had no established product sales, remained dependent on raising capital, and disclosed substantial doubt about its ability to continue as a going concern.
Material changes and unusual items
- Net loss widened by $8.12 million year over year. R&D expense rose $5.18 million, including increased preparation for a potential Multikine BLA and commercial manufacturing; G&A expense rose $3.70 million. Higher employee stock-based compensation and depreciation contributed to the increases.
- FY2020 included $0.81 million of warrant inducement expense and $0.35 million of derivative losses. The Ergomed share-resale arrangement generated a reported non-operating gain of about $0.89 million.
- CEL-SCI identified an ASC 842 lease-accounting error: the opening finance lease right-of-use asset and stockholders’ equity were understated by about $2.0 million at October 1, 2019. It said the error was material to the balance sheet but immaterial to interim statements of operations; quarterly 2020 reports were to be corrected. The annual statements reflect the adjustments.
- Management reported a material weakness in internal control over financial reporting and concluded disclosure controls were ineffective as of year-end. Planned remediation included additional lease reviews, outside specialists, and training.
Outlook, risks and contingencies
- No formal financial guidance was provided. Management estimated about $5.9 million of additional Phase 3 and clinical-study-report costs, excluding other related costs. The manufacturing-facility upgrade was estimated at $10.5 million, with approximately $3.1 million incurred and the landlord contingently agreeing to finance the final $2.4 million.
- COVID-19 delayed Phase 3 data lock and the manufacturing-facility expansion. The company warned that further disruption, costs, or delays could affect its programs and potential BLA timing.
- In December 2020, after year-end, CEL-SCI sold 1.0 million shares for approximately $13.6 million net proceeds. It stated additional funding would still be needed to advance Multikine toward commercialization; financing availability and terms were uncertain.
- Key risks include failure of the Phase 3 trial or regulatory approval, manufacturing scale-up and inspection, ongoing cash needs and dilution, reliance on Multikine, clinical and regulatory uncertainty for earlier-stage programs, and potential litigation or competition.
- The company estimated approximately $7.4 million remained to complete the facility upgrade and disclosed a $1.67 million lease deposit. No legal proceedings were reported under Item 3.
Most important facts for investors to verify
- Final, blinded Phase 3 analysis: endpoint results, statistical significance, and whether results support a BLA.
- Updated cash runway, operating burn, and the timing and terms of future financing; consider the December 2020 offering and potential dilution.
- Progress, cost, and schedule for the manufacturing upgrade, regulatory readiness, and any effect on BLA submission or approval.
- Completion of the lease-accounting corrections and remediation of the disclosed material weakness.
- Whether animal-only LEAPS COVID-19 results translate to human studies, and the milestones and funding required for CEL-4000.