Cadrenal Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023; filed August 10, 2023. Cadrenal is an early-stage biopharmaceutical company developing tecarfarin, an investigational anticoagulant for prevention of systemic thromboembolism in patients with end-stage kidney disease and atrial fibrillation. The company has no commercial products or revenue.
Financial condition and key metrics
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.03 million | $5.23 million |
| Net loss | $1.00 million | $6.18 million |
| Net loss per share | $0.09 | $0.55 |
| Cash used in operating activities | Not separately provided | $2.21 million |
| Cash and cash equivalents at period-end | $3.23 million | |
| Total debt at period-end | $0 |
- General and administrative expense was $784,623 for the quarter and $1.75 million for the six months.
- Research and development expense was $240,957 for the quarter and $3.48 million for the six months. Six-month R&D included a $3.0 million non-cash stock issuance to HESP LLC related to the tecarfarin asset purchase.
- Six-month net loss included $4.42 million of non-cash expenses, including the $3.0 million stock-based asset purchase payment, $740,139 of debt-extinguishment loss, $454,195 of equity-based compensation, and $216,095 of derivative-liability remeasurement.
- Working capital was $3.14 million and accumulated deficit was approximately $12.89 million at June 30, 2023.
- Total assets were $3.56 million and stockholders’ equity was $3.18 million at June 30, 2023, compared with a deficit of $5.55 million at December 31, 2022.
Material changes versus the comparable period
- Quarterly operating expenses increased to $1.03 million from $482,347 in the prior-year quarter, while net loss increased to $1.00 million from $502,141.
- For the six-month comparison, operating expenses increased to $5.23 million from $652,867 and net loss increased to approximately $6.18 million from $678,788. The prior-year period covered January 25, 2022 inception through June 30, 2022 and is not a full comparable six-month period.
- General and administrative expense increased substantially, driven by personnel, consulting, insurance, and other public-company costs.
- The January 2023 IPO generated $7.0 million of gross proceeds and approximately $5.41 million of net proceeds. The company also issued 1,140,700 shares to settle convertible debt and issued 250,000 shares upon warrant exercise; all debt was settled in January.
- Derivative liabilities declined from $4.38 million at December 31, 2022 to zero at June 30, 2023 following conversion and settlement of the related notes in connection with the IPO.
Cash flow, liquidity, outlook, and risks
- Net cash provided by financing activities was $5.41 million for the six months, primarily from the IPO, partly offset by repayment of the November 2022 notes using warrant-exercise proceeds.
- On July 14, 2023, after quarter-end, Cadrenal completed a private placement generating approximately $7.5 million of gross proceeds before fees and expenses. The financing included common shares, pre-funded warrants for up to 2,985,715 shares, and common warrants for up to 4,285,715 shares.
- Management stated that cash of approximately $9.6 million as of August 7, 2023 was expected to fund operations for at least the next twelve months. The filing also states that approximately $45 million may be required to commence and complete the planned Phase 3 trial and submit an NDA.
- Management intends to seek additional equity or debt financing and potential partnering transactions. There is no assurance that additional funding or partnerships will be available on acceptable terms.
- Subject to FDA acceptance of the proposed protocol, the company intends to commence its pivotal Phase 3 trial in the first half of 2024. Tecarfarin has orphan drug and FDA Fast Track designations, but neither designation assures regulatory approval.
- Principal risks include clinical-trial execution and results, FDA approval, substantial future financing needs, dilution from equity and warrants, competition, manufacturing, intellectual-property challenges, and the company’s limited operating history.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and no material changes to previously disclosed risk factors other than risks related to the July 2023 private-placement warrants.
Important facts for investors to verify
- Confirm the post-quarter-end private-placement net proceeds, cash balance, warrant terms, and potential dilution.
- Assess whether current liquidity is sufficient relative to the company’s stated approximately $45 million Phase 3 and NDA funding requirement.
- Verify FDA feedback and acceptance of the proposed Phase 3 protocol and the anticipated trial-start timing.
- Review the composition and recurring nature of operating expenses, particularly personnel, consulting, insurance, and equity-based compensation.
- Reconcile the filing’s minor net-loss presentation discrepancy: the financial statements report six-month net loss of $6,176,575, while MD&A reports $6,176,574.
- Evaluate patent expiration and extension prospects, as the company states that two issued U.S. patents currently expire in 2024.