CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended March 31, 2021. The filing is unaudited. CEL-SCI is a development-stage biotechnology company whose lead candidate, Multikine, is investigational and not approved for sale.
Financial performance and position
| Metric | Three months ended March 31, 2021 | Six months ended March 31, 2021 | Comparable 2020 period |
|---|---|---|---|
| Grant income | $0 | $0 | $298,726 and $334,232, respectively |
| Research and development expense | $5.22 million | $10.64 million | $4.46 million and $8.71 million |
| General and administrative expense | $3.31 million | $6.63 million | $2.56 million and $5.20 million |
| Operating loss | $8.53 million | $17.26 million | $6.72 million and $13.57 million |
| Net loss | $11.28 million | $19.22 million | $9.07 million and $14.60 million |
| Net loss per share | $0.28 | $0.49 | $0.25 and $0.41 |
The company reported no product sales or operating revenue; the filing does not provide a meaningful operating margin. Six-month operating expenses rose 24% year over year, while net loss increased 32%. Higher research and development and administrative costs included increased employee stock-based compensation. Six-month stock-based compensation was approximately $7.1 million, versus $3.9 million in 2020.
- Liquidity: At March 31, cash and cash equivalents were $6.43 million and U.S. Treasury bills were $11.15 million, for approximately $17.58 million in cash and short-term investments. Current assets totaled $19.87 million; current liabilities totaled $5.82 million.
- Cash flow: Six-month operating cash use was $8.78 million; investing cash use was $17.77 million, including $11.15 million of Treasury bill purchases and $6.63 million of property and equipment purchases. Financing provided $17.48 million, primarily from stock offerings and warrant and option exercises. Cash declined $9.08 million; excluding the Treasury bill purchase, management said cash increased approximately $2.1 million.
- Debt and leases: The balance sheet reports finance lease liabilities of approximately $12.23 million and operating lease liabilities of approximately $1.20 million. The filing describes no conventional borrowing balance. A landlord agreed to finance the final $2.4 million of facility upgrade costs through increased lease payments.
- Equity financing and dilution: A December 2020 public offering raised approximately $13.6 million. During the six months, warrant and option exercises generated approximately $4.6 million. Shares outstanding increased to 40.82 million from 38.73 million at September 30, 2020.
Material changes and business developments
- Multikine’s pivotal Phase 3 head-and-neck cancer trial enrolled 928 patients and reached its required 298-event threshold. The database was locked, and final statistical analysis was underway; the company remained blinded to results.
- Six-month research and development expense increased approximately 22%, including higher employee stock compensation and Phase 3 trial costs. General and administrative expense increased approximately 29%, primarily due to higher employee stock compensation.
- The company spent approximately $6.9 million in the six-month period upgrading its manufacturing facility; approximately $9.5 million of the estimated $10.6 million total upgrade cost had been incurred by March 31, 2021.
- The $2.11 million six-month derivative-instrument loss reflected warrant fair-value changes and is noncash in the cash-flow reconciliation. Other non-operating gains fell year over year, largely reflecting the timing of Ergomed’s resale of company shares.
Outlook, risks and contingencies
- Management estimated a further $4.4 million of direct costs for the remainder of the Phase 3 trial and clinical study report filing. This estimate excludes other related costs, including drug manufacturing, and could rise.
- Management stated that additional capital or long-term financing will be needed to continue research. It expects to seek funding through warrant exercises, partnerships, and debt or equity financing, but cannot assure availability or acceptable terms; failure to raise funds could require curtailed operations.
- The filing expressly identifies substantial doubt about the company’s ability to continue as a going concern, due to recurring operating losses and future liquidity needs. Financial statements include no adjustments for the uncertainty.
- Multikine and LEAPS programs remain under development; timing of revenue and regulatory approval is uncertain. The Phase 3 results are pending, and Multikine has not been approved or established as safe or effective for any use.
- COVID-19’s full effect on the company’s liquidity, operations, suppliers and workforce remained uncertain. The company reported no significant market-risk exposure.
- Disclosure controls and procedures were determined to be ineffective as of March 31, 2021. Management reported implementing additional lease-accounting controls.
- Related-party warrant extensions involved warrants held by a trust of which the CEO is a beneficiary and by company officers. The company recorded approximately $86,000 as a deemed dividend for the CEO-beneficiary trust warrant extensions.
Important facts for investors to verify
- Timing and outcome of the blinded Phase 3 Multikine statistical analysis, and any subsequent regulatory or commercial plans.
- Actual cash burn, remaining clinical and manufacturing costs, and financing needs relative to available cash and Treasury bills.
- Terms, timing and potential dilution of future equity raises, warrant exercises, and other financing arrangements.
- Progress, final cost and operational readiness of the manufacturing facility upgrade, including lease-payment obligations.
- Remediation and effectiveness of the company’s disclosure controls, and changes in going-concern risk.