Cadrenal Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2023; filed November 9, 2023. Financial statements are unaudited. Cadrenal is an early-stage biotechnology company developing tecarfarin, an oral anticoagulant targeting patients with certain rare medical conditions, including ESKD and atrial fibrillation. The company has no approved products or commercial revenue.
Financial condition and results
| Metric | Three months ended September 30, 2023 | Nine months ended September 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.14 million | $6.37 million |
| Loss from operations | $(1.14) million | $(6.37) million |
| Net loss | $(1.04) million | $(7.21) million |
| Net loss per share, basic and diluted | $(0.07) | $(0.57) |
| Cash used in operating activities | Not separately disclosed | $(2.84) million |
Margins: Gross margin and operating margin are not meaningful because the company generated no revenue. Research and development expense was $3.72 million for the first nine months, including a $3.0 million noncash stock payment related to the tecarfarin asset purchase. General and administrative expense was $2.65 million.
Liquidity: Cash and cash equivalents were $9.11 million at September 30, 2023, compared with $32,586 at December 31, 2022. Working capital was $8.71 million and accumulated deficit was $13.93 million. Management reported approximately $8.9 million of cash as of November 9, 2023 and expects existing cash to fund operations for at least 12 months from the filing date.
Debt: The company reported no debt at September 30, 2023, compared with $597,068 of net debt at December 31, 2022. Convertible notes were converted into 1,140,700 common shares in January 2023, derivative liabilities of $4.60 million were derecognized, and the remaining debt was settled in connection with the IPO. A $740,139 noncash loss on debt extinguishment was recognized during the first nine months.
Material changes versus comparable periods
- Third-quarter net loss increased modestly from $1.03 million in the prior-year quarter to $1.04 million, while operating expenses increased 17.5% to $1.14 million.
- Third-quarter research and development expense increased to $243,948 from $56,388, primarily due to higher personnel costs and stock-based compensation.
- First-nine-month net loss increased to $7.21 million from $1.70 million in the comparable 2022 inception period. The increase reflects higher operating costs, the $3.0 million stock-based asset purchase payment, the $740,139 debt extinguishment loss, and a $216,095 derivative-liability remeasurement charge.
- Cash increased substantially as a result of the January 2023 IPO, which generated $5.41 million of net proceeds, and the July 2023 private placement, which generated $6.51 million of net proceeds. The company also received $250,000 from warrant exercises.
- Shares outstanding increased to 13,022,754 at September 30, 2023 from 8,193,875 at December 31, 2022. The July financing also created 7,271,430 pre-funded and common warrant shares before considering placement-agent warrants, increasing potential dilution.
Outlook, risks and unusual items
- Management intends to submit the proposed Phase 3 trial design to the FDA and, subject to FDA acceptance and sufficient funding, commence the pivotal trial in the second half of 2024. The filing does not provide a firm trial budget or an assurance that the FDA will accept the proposed design.
- Additional funding will be required to complete the planned Phase 3 trial and submit a New Drug Application. Management expects to seek equity and debt financing and potential partnering transactions, but states that such funding may not be available on acceptable terms or at all.
- Failure to obtain financing could delay or reduce research programs or require the company to limit or cease operations.
- Tecarfarin remains investigational. FDA orphan drug and Fast Track designations do not guarantee approval, market acceptance, exclusivity, or commercial success. Prior clinical development included a Phase 2/3 trial that did not demonstrate superiority over warfarin on its primary endpoint.
- Cadrenal received a Nasdaq notice on September 6, 2023 for noncompliance with the $1.00 minimum bid-price requirement. The initial compliance period runs through March 4, 2024, subject to possible extension and further Nasdaq proceedings.
- The company has approximately 7.66 million warrants outstanding at September 30, 2023, including pre-funded warrants exercisable at $0.0001 and common warrants generally exercisable at $1.75, creating substantial potential dilution. The warrants are not publicly listed.
- Two issued U.S. patents related to tecarfarin currently expire in 2024, although the company expects to seek patent-term extensions. Cadrenal has not completed a freedom-to-operate analysis and could face third-party intellectual-property claims.
- The company disclosed no material legal proceedings, no off-balance-sheet arrangements, and no material changes in internal control over financial reporting. Management concluded disclosure controls were effective at the reasonable-assurance level.
Investor verification points
- Verify current cash usage, remaining runway, and the timing and terms of any required financing or partnering transaction.
- Verify FDA feedback and acceptance of the Phase 3 protocol, including the proposed surrogate endpoint and anticipated trial start.
- Assess the probability, timing, and cost of Phase 3 development and eventual NDA submission.
- Review the capitalization table and potential dilution from 7.66 million outstanding warrants, 1.18 million stock options, and future equity financings.
- Monitor Nasdaq minimum-bid-price compliance and any potential effect on liquidity, financing access, and trading status.
- Evaluate patent expiration, extension efforts, licensing rights, and freedom-to-operate risks for tecarfarin.