Pasithea Therapeutics Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; financial statements are unaudited. Pasithea is a clinical-stage biotechnology company focused on CNS disorders and other diseases. Its lead candidate, PAS-004, is in a Phase 1 trial; PAS-001 and PAS-003 remain discovery-stage programs. The former Clinics segment was discontinued in 2023.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| General and administrative expense | $2.29 million | $2.12 million; up 8.3% |
| Research and development expense | $1.75 million | $1.10 million; up 59.6% |
| Operating loss | $4.04 million | $3.21 million |
| Net loss | $3.86 million | $3.54 million, including $0.27 million from discontinued operations |
| Basic and diluted loss per share | $3.70 from continuing operations | $2.60 from continuing operations; $0.20 from discontinued operations |
| Operating cash flow | $(4.32) million | $(3.20) million |
| Cash and cash equivalents | $12.01 million at March 31 | $16.33 million at December 31, 2023 |
| Working capital | $10.73 million at March 31 | $14.06 million at December 31, 2023 |
No product revenue or gross margin was reported. Cash declined by $4.32 million during the quarter, primarily from operating expenditures and higher prepaid expenses. The company reported no investing or financing cash flows in Q1 2024. Total liabilities were $2.52 million, including $2.43 million of accounts payable and accrued liabilities, $32,989 of current lease liability, and $57,650 of warrant liabilities. No borrowings or credit facility were reported.
Material changes and operating developments
- R&D expense rose 59.6%, mainly due to PAS-004 Phase 1 clinical costs and manufacturing (CMC) activity, partly offset by lower discovery-program preclinical spending.
- G&A expense increased 8.3%; higher legal, public-company, insurance, and stock-compensation costs were partly offset by lower personnel and certain professional-service costs.
- Continuing-operations net loss increased 18.2% year over year. Total net loss increased 9.1%, partly moderated by the absence of the prior-year discontinued-operations loss.
- The company effected a 1-for-20 reverse stock split on January 2, 2024. Reported share and per-share figures reflect the split.
Outlook, risks, and other notable items
- Funding and going concern: Management states that existing working capital is not expected to meet needs for twelve months from the financial-statement issuance date without additional capital. The filing says substantial doubt exists about the company’s ability to continue as a going concern without further funding. The company depends on equity and/or debt financing and has no credit facility or committed capital source.
- Development outlook: Management expects R&D expense to increase in 2024 as PAS-004 clinical development and CMC work continue. It planned to add three Eastern European trial sites in Q3 2024; the Phase 1 study was then operating at four U.S. sites. Management also plans a Phase 1 study in adult and pediatric NF1-associated neurofibromas.
- Other outlook: Management expects G&A expense to decrease in 2024 compared with 2023, partly because certain 2023 costs were non-recurring. It expects inflation to continue pressuring costs during 2024.
- Key risks: Clinical and regulatory uncertainty, reliance on third-party CROs and manufacturers, need for additional capital, and potential development delays or increased costs. The filing discusses possible exposure to foreign-supplier restrictions, including proposed U.S. legislation affecting certain biotechnology suppliers.
- Controls: Disclosure controls were deemed ineffective at a reasonable-assurance level because of a previously identified material weakness involving review of the 2023 annual income tax provision disclosure. Management described remediation steps, including enhanced review procedures and tax-professional involvement.
- No material legal proceedings, material changes to the risk factors in the 2023 Form 10-K, or reportable subsequent events were disclosed.
Important facts for investors to verify
- Cash runway assumptions, expected operating burn, and timing and terms of any financing needed to address the disclosed going-concern uncertainty.
- Enrollment, safety, timing, and future data milestones for the PAS-004 Phase 1 trial, including whether planned Eastern European sites opened.
- Whether the company’s expected clinical and manufacturing spending can be sustained with available capital.
- Progress in remediating the internal-control material weakness and whether controls are subsequently judged effective.