GT Biopharma, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. Although the request references 2018 Q4, this filing reports full-year results; it does not provide clear standalone Q4 financial results.
Business context
GT Biopharma is a clinical-stage biopharmaceutical company developing immuno-oncology candidates using its TriKE and TetraKE natural-killer-cell engager platforms and a bispecific antibody-drug conjugate platform. Its lead programs include GTB-3550, GTB-C3550 and GTB-1550. The company also holds CNS development assets acquired with Georgetown Translational Pharmaceuticals, but shifted priority toward oncology during 2018 and is pursuing ways to monetize the CNS assets.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Research and development expense | $9.1 million | $1.1 million |
| Selling, general and administrative expense | $12.5 million | $134.5 million |
| Impairment charge | $228.5 million | None reported |
| Interest expense | $9.1 million | $8.6 million |
| Net loss | $259.2 million | $144.2 million |
| Net loss per share | $5.16 | $8.60 |
| Net cash used in operating activities | $10.7 million | $5.4 million |
The filing reports no product sales, so gross margin is not meaningful; it does not provide a clear gross-margin figure. The 2018 net loss included a $228.5 million impairment of acquired CNS in-process R&D assets, following a strategic reprioritization. SG&A fell substantially from 2017, when $129.1 million of stock compensation was recorded; 2018 SG&A included $2.3 million of stock compensation. 2018 R&D included $6.8 million of non-cash compensation.
At year-end, cash was $60,000, current assets were $90,000, current liabilities were $14.0 million, and the working capital deficit was $13.9 million. Current liabilities included $10.7 million of convertible debentures. Total assets were $25.4 million, compared with $254.4 million in 2017, primarily reflecting the impairment. Accumulated deficit was $528.7 million. Operating cash use was partly funded by $10.2 million of net financing cash flow; the company reported $15 million raised through 2018 convertible-debt issuances and repaid $4.4 million of earlier notes.
Material changes, outlook and risks
- Pipeline: The FDA cleared the GTB-3550 IND in November 2018, authorizing a first-in-human Phase 1 study. Management expected to begin the trial in the first half of 2019. Data from the completed 18-patient GTB-1550 Phase 1/2 study were still under analysis.
- Spending outlook: Management projected 2019 R&D spending of approximately $12–15 million and SG&A, excluding stock compensation, of approximately $1–2 million in coming quarters. It expected to need another $15 million of capital in 2019 to fund operations and liabilities.
- Funding and going concern: The auditor and management identified substantial doubt about the company’s ability to continue as a going concern. The company stated that additional financing was required, with no assurance it could be obtained. Cash at year-end was insufficient for continued operations.
- Subsequent financing: On February 4, 2019, the company issued $1.35 million of secured convertible notes, including $1.05 million in gross proceeds and $0.30 million of settled debt. Notes bear 10% interest, mature August 2, 2019, convert at $0.60 per share, and are secured by substantially all assets. The filing says further capital was still needed by the end of Q2 2019.
- Dilution and debt exposure: 2018 convertible notes and debentures carried conversion features, alongside warrants. The filing lists 8.68 million potentially dilutive common equivalents excluded from diluted loss per share. In the first quarter of 2019, 723,940 shares were issued upon conversion of $437,271 of principal and interest.
- Contingencies and unusual items: A December 2018 lawsuit by noteholders alleged defaults involving approximately $2.2 million of principal and warrants for 480,352 shares; settlement discussions were ongoing without a finalized agreement. The company settled other matters for $100,000 cash and 245,000 restricted shares. The CNS impairment depends on valuation assumptions, including licensing prospects and projected cash flows.
- Controls and leadership: Management found material weaknesses in financial reporting controls, including inadequate segregation of duties, executive-override risk and insufficient documented accounting procedures. Disclosure controls were deemed ineffective, and the weaknesses had not been remediated as of the report. Several senior-management changes occurred; CEO Raymond Urbanski resigned in March 2019 and Anthony Cataldo was appointed CEO and chairman.
- Operating risks: The company had three employees at year-end, relied on external manufacturers and clinical partners, and had no commercial products or sales force. Clinical, regulatory, manufacturing, financing, intellectual-property and market-acceptance risks remain substantial.
Most important facts for investors to verify
- Current cash runway, near-term obligations and the status and terms of any additional financing after the February 2019 secured-note issuance.
- Current status, enrollment, safety and trial timelines for GTB-3550, and results or publication plans for the GTB-1550 Phase 1/2 study.
- Progress on resolving the Empery noteholder litigation and any other debt defaults, settlements or collateral claims.
- Whether the company remediated its material weaknesses and whether subsequent filings report control improvements.
- Updated share count and potential dilution from convertible securities, warrants, the February 2019 notes and any subsequent financings.
- Whether CNS assets were licensed or otherwise monetized, and the assumptions supporting their remaining carrying value.