CEL-SCI Corporation — Form 10-Q
Reporting period: Quarter and six months ended March 31, 2022 (the company’s fiscal second quarter). Financial statements are unaudited; comparisons are with the periods ended March 31, 2021, or September 30, 2021 for balance-sheet items.
Business context and financial performance
CEL-SCI is a development-stage biotechnology company focused primarily on Multikine, an investigational immunotherapy for advanced head and neck cancer, and preclinical LEAPS candidates. The filing reports no product sales; the company says it cannot predict when products may generate revenue.
- Three months: Operating expenses were $9.55 million, including R&D of $6.52 million and G&A of $3.03 million. Operating loss was $9.55 million and net loss was $9.82 million, or $0.23 per share.
- Six months: Operating expenses were $18.40 million, including R&D of $12.61 million and G&A of $5.79 million. Operating loss was $18.40 million and net loss available to common shareholders was $18.61 million, or $0.43 per share.
- No revenue or gross margin was reported. The company remains loss-making, so a meaningful operating margin is not provided.
- Cash flow, six months: Operating cash use was $7.54 million; investing activities provided $5.58 million, primarily from Treasury bill maturities; financing activities provided $0.18 million. Cash declined $1.78 million to $34.28 million. The prior-year period used $8.78 million in operating cash and ended with $6.43 million of cash.
- Liquidity: Current assets were $37.28 million and current liabilities $4.47 million, implying working capital of about $32.80 million. Cash was $34.28 million; the $6.15 million of Treasury bills held at September 30, 2021 had matured by March 31, 2022.
- Obligations: Total liabilities were $19.03 million. Finance lease obligations were approximately $13.95 million net present value, and operating lease obligations approximately $2.10 million. The filing does not report conventional borrowings outstanding at quarter-end.
Changes versus comparable periods
- Six-month R&D expense rose $1.97 million, or 19%, year over year; quarterly R&D rose $1.30 million, or 25%. The company attributed increases to employee stock compensation, depreciation on manufacturing-facility improvements, and preparation for potential commercial production, partly offset by lower Phase 3 trial costs.
- Six-month G&A expense fell $0.84 million, or 13%; quarterly G&A fell $0.28 million, or 9%, principally due to lower employee stock compensation.
- Six-month net loss improved from $19.22 million to $18.61 million. The comparison includes a $0.37 million derivative gain in 2022 versus a $2.11 million derivative loss in 2021. The 2021 period also included an $0.09 million warrant-modification charge.
- Weighted-average shares increased to 43.10 million for the six-month period from 39.35 million a year earlier. Potentially dilutive options, warrants, and unvested restricted shares were excluded from diluted loss per share as anti-dilutive.
Outlook, risks and notable items
- Management says additional capital or long-term financing will be needed to continue development and pursue commercialization; possible sources include warrant exercises, partnerships, debt, or equity. There is no assurance funding will be available on acceptable terms, and operations could be curtailed if funding is insufficient.
- The filing states that recurring losses and future financing needs raise substantial doubt about the company’s ability to continue as a going concern. Management says cash on hand is sufficient for budgeted requirements and alleviates substantial doubt for more than twelve months from the financial-statement date; the company nevertheless expects to require additional financing for its broader development and commercialization efforts.
- Management reported that the Phase 3 study did not meet its primary endpoint when the two treatment arms were combined. A prespecified analysis of the Multikine-plus-surgery-and-radiation arm showed a reported 14.1 percentage-point five-year overall-survival advantage (62.7% versus 48.6%; p=0.0236; HR=0.68). The arm receiving chemotherapy did not show the same benefit, according to the company. Multikine remains investigational, and its safety and efficacy have not been established for an approved use. The company says it aims to seek FDA approval for the relevant patient population; timing and outcome are uncertain.
- The company estimates about $0.8 million of additional Phase 3 trial and clinical study report costs, excluding related costs such as drug manufacturing. It reported approximately $63 million of direct costs to date for the trial and report.
- The manufacturing-facility upgrade was completed in October 2021 at a total cost of approximately $11.1 million; the landlord agreed to finance $2.4 million. Repayment is through increased lease payments, with financing interest accruing at 13.75% under the arrangement.
- Management described COVID-19 impacts as uncertain. It reported no significant market-risk exposure, effective disclosure controls as of March 31, 2022, and no material changes in internal control during the quarter.
Important facts for investors to verify
- Regulatory strategy and whether the FDA will accept a submission based on the prespecified subgroup despite the overall trial missing its primary endpoint.
- Clinical data underlying the reported subgroup survival benefit, including patient population, analysis, and any further regulatory or scientific review.
- Cash burn, available financing, and whether cash will support operations beyond the period management assessed; the filing provides no precise cash-runway estimate.
- Future costs for manufacturing, regulatory work, and commercialization, and the full repayment economics of the landlord financing and long-term leases.
- Share dilution from outstanding options and warrants; the filing reports 12.59 million options and warrants and 151,250 unvested restricted shares excluded from diluted EPS at March 31, 2022.