Artelo Biosciences, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022; financial statements are unaudited. Amounts are in USD thousands unless otherwise stated. Artelo is a clinical-stage biopharmaceutical company and has generated no revenue.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Operating expenses | $2,394 | $2,245 | $6,811 | $6,195 |
| Research and development | $1,078 | $1,034 | $2,598 | $2,311 |
| General and administrative | $1,316 | $1,211 | $4,213 | $3,884 |
| Net loss | $2,330 | $2,245 | $6,744 | $6,192 |
| Loss per share, basic and diluted | $0.82 | $1.37 | $2.38 | $3.97 |
Q3 operating expenses increased $149, or about 7%, and net loss increased $85 from the comparable quarter. For the nine-month period, operating expenses rose $616, or about 10%, and net loss rose $552. Management attributed expense growth chiefly to consulting, conference, legal and insurance costs, and to payroll and subcontractor costs associated with ART27.13 clinical trials. The filing does not provide a meaningful revenue or gross-margin measure.
- Cash and investments: Cash and cash equivalents were $7,136 at September 30, 2022, versus $12,162 at December 31, 2021. Trading and available-for-sale securities totaled $12,347; cash plus these securities were approximately $19.5 million.
- Liquidity: Working capital was $19,823, down from $23,582 at year-end 2021. Total assets were $22,415 and stockholders’ equity was $21,903.
- Cash flow, nine months: Operating activities used $5,715, compared with $4,855 in 2021. Investing activities provided $1,162, mainly reflecting securities purchases and sales. Financing activities used $134, representing stock issuance costs; the comparable 2021 period included $7,610 of net financing proceeds.
- Debt and obligations: The filing reports no borrowings or material financial debt. Operating lease liabilities were $74, including $42 current.
Business progress and material changes
- ART27.13: In a Phase 1b/2a trial, CAReS, for cancer-related anorexia. After completing enrollment in the first three planned dosing cohorts, the company elected to enroll a fourth, higher-dose cohort before selecting a dose for Phase 2a.
- ART26.12: Preclinical FABP5-inhibitor program. The company prioritized chemotherapy-induced peripheral neuropathy as its initial development indication and said regulatory-enabling work was beginning.
- ART12.11: Preclinical cannabidiol cocrystal program.
- Cash declined by $5,026 from year-end, while total assets fell $5,836; management attributed the asset decrease primarily to the nine-month net loss. Accumulated deficit reached $27,682.
- A 1-for-15 reverse stock split took effect August 10, 2022; share and per-share data are retroactively adjusted. The company reported 2,855,688 common shares outstanding as of November 7, 2022.
Outlook, risks and unusual items
- Management said cash and marketable securities were expected to fund planned operations through the first half of 2024. It anticipated operating losses and operating cash use would increase as programs advance. The company remains dependent on additional financing and has no approved products or product revenue.
- The May 2022 Lincoln Park agreement permits, but does not require, sales of up to $20 million of common stock over 36 months. No shares had been sold under the facility by September 30, 2022. Issuances could dilute existing shareholders.
- Management anticipated starting enrollment in the Phase 2 portion of CAReS before the end of 2022. First-in-human studies of ART26.12 could begin in the first half of 2024, subject to development, supply, pandemic and regulatory factors. These are forward-looking expectations, not assurances.
- COVID-19-related recruitment and supply-chain disruption, geopolitical tensions, trial execution and regulatory uncertainty, reliance on third-party manufacturers and research organizations, intellectual-property and licensing risks, and the need for future financing could delay or constrain development. The company also cited potential loss or reduction of UK R&D tax credits.
- Other items: nine-month stock-based compensation was $1,850, including $1,668 related to related parties. Foreign currency translation and available-for-sale security changes contributed to a $370 nine-month comprehensive loss beyond net loss. The company reported no material pending legal proceedings and regained Nasdaq minimum-bid-price compliance in August 2022.
Important facts for investors to verify
- Whether cash, securities and any future Lincoln Park proceeds will support operations beyond the stated first-half-2024 runway, given expected increases in development spending.
- CAReS enrollment, safety and dose-selection progress, and whether the anticipated Phase 2 enrollment timing was achieved.
- ART26.12 regulatory-enabling progress and the assumptions behind the potential first-in-human timing; also monitor ART12.11 development priorities.
- Future operating cash burn, stock-based compensation and related-party expense, equity issuance and dilution, and the value and composition of marketable securities.
- Clinical, regulatory, manufacturing, licensing, intellectual-property and UK tax-credit developments that could affect development timelines, costs or funding needs.