Citius Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Third quarter and nine months ended June 30, 2019; fiscal year ends September 30. The company is a development-stage specialty pharmaceutical company focused on critical-care products. It had no revenue from operations.
Financial results and liquidity
| Metric | Three months ended June 30, 2019 | Prior-year quarter | Nine months ended June 30, 2019 | Prior-year period |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $2.77 million | $0.78 million | $6.58 million | $4.83 million |
| Total operating expenses | $4.43 million | $2.02 million | $11.94 million | $10.13 million |
| Net loss | $4.41 million | $2.02 million | $11.91 million | $9.69 million |
| Net loss per share, basic and diluted | $0.20 | $0.19 | $0.61 | $0.99 |
- For the nine months, operating cash outflow was $9.53 million, compared with $8.81 million in the prior-year period. Cash and cash equivalents were $4.51 million at June 30, down from $9.18 million at September 30, 2018.
- Working capital was $519,532. Current liabilities were $4.04 million, including $172,970 of related-party notes payable and $70,100 of accrued related-party interest. The filing reports no other debt category or long-term borrowings on the balance sheet.
- Stockholders’ equity was $21.51 million, versus $27.87 million at September 30, 2018. The accumulated deficit was $52.17 million.
- There is no meaningful revenue-based margin to report. Operating loss equaled operating expenses because revenue was zero.
Material changes versus prior periods
- Quarterly R&D expense rose by $1.99 million, primarily from Mino-Lok costs, which increased to $2.37 million from $0.72 million. Hydro-Lido R&D also increased.
- Nine-month R&D expense increased by $1.75 million, reflecting the ongoing Phase 3 Mino-Lok trial, higher Hydro-Lido costs, and a $125,000 Mino-Wrap license payment.
- Nine-month net loss increased by $2.22 million. The prior-year period included a $450,000 gain from extinguishment of a liability; no comparable gain was recorded in 2019.
- General and administrative expense was $4.78 million for the nine months, up modestly from $4.67 million. The prior-year period included $357,400 in underwriter release costs.
- In an April 2019 registered direct offering, the company raised $4.83 million net by issuing 3.43 million shares and warrants. Common shares outstanding increased to 22,075,781 at June 30 from 16,198,791 at September 30, 2018. The filing lists 16.49 million warrants outstanding at June 30, 2019.
Outlook, risks, and unusual items
- Going concern: Management said limited capital and operating cash outflows raise substantial doubt about the company’s ability to continue as a going concern. It expected available cash to fund operations only through September 2019 and planned to raise more capital; there is no assurance financing will be available in sufficient amounts or on acceptable terms.
- Management expected R&D expense to continue increasing as it pursued the Mino-Lok Phase 3 trial and began Mino-Wrap development. The company also reported Phase 2b development of Hydro-Lido.
- Management cited financing availability, clinical-trial cost, timing and results, regulatory approvals, commercial feasibility, personnel, suppliers, and strategic partners among key risks. It reported no change to risk factors since its 2018 Form 10-K.
- A 76-month office lease began July 1, 2019. The company estimated adoption of the new lease accounting standard would recognize an approximately $1.12 million right-of-use asset and lease liability starting in fiscal 2020.
- The company reported no legal proceedings, defaults upon senior securities, or off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether the company obtained financing after the filing and whether cash runway extended beyond September 2019.
- Current clinical and regulatory progress, timelines, and expected funding needs for Mino-Lok, Mino-Wrap, and Hydro-Lido.
- Potential dilution from outstanding warrants and equity awards, including terms and exercise activity since June 30, 2019.
- Related-party borrowing, accrued interest, and the terms of any subsequent funding arrangements.
- The future cost and balance-sheet impact of the new office lease and adoption of lease accounting.