Celcuity Inc. annual report, FY2019

Celcuity Inc. — FY2019 Form 10-K

Reporting period: Fiscal year ended December 31, 2019. The filing is an annual report; it does not provide separate fourth-quarter financial results. Celcuity is a development-stage oncology diagnostics company developing CELsignia tests that measure signaling activity in living tumor cells to help match patients with targeted therapies.

Financial and operating performance

Metric20192018
RevenueNoneNone
Research and development expense$6.27 million$6.33 million
General and administrative expense$1.54 million$1.61 million
Total operating expenses / operating loss$7.81 million / ($7.81 million)$7.93 million / ($7.93 million)
Net loss($7.36 million)($7.48 million)
Basic and diluted loss per share($0.72)($0.74)
Cash used in operating activities$6.00 million$6.08 million

With no revenue, gross profit and operating margins are not meaningful. Cash and cash equivalents were $18.74 million at year-end, compared with $15.94 million a year earlier; short-term investments were zero, versus $8.95 million in 2018. Total assets were $20.28 million, total liabilities $0.98 million, and stockholders’ equity $19.30 million. Liabilities include operating and finance lease obligations; the filing reports no material conventional borrowing. Net cash provided by investing activities was $8.53 million, primarily from investment maturities/sales, less $0.38 million of property and equipment purchases. Financing activities provided $0.26 million.

Changes versus 2018

  • Net loss narrowed by approximately $0.12 million, or 2%; total operating expenses declined 2%.
  • R&D expense decreased 1%. Lower compensation and stock-based compensation were largely offset by increased clinical validation, laboratory, patent, and business-development spending.
  • Cash rose by $2.79 million, while cash plus short-term investments declined as the company held no investments at year-end 2019.
  • Celcuity completed development of its PI3K-signaling breast cancer test in Q4 2019. Management intends to combine it with HER2 and c-Met testing in a multi-pathway test.
  • A material weakness in internal control over financial reporting identified in 2018 was reported as remediated; management concluded controls were effective at December 31, 2019. The auditor did not attest to internal-control effectiveness.

Outlook, developments, and risks

  • Management stated that available cash was expected to fund operations and obligations until the fourth quarter of 2021, based on its current business plan. It expects R&D, clinical-trial, general and administrative, and future sales and marketing expenses to increase; further capital may be needed and may not be available on acceptable terms.
  • Celcuity had no revenue and had incurred losses since inception. Future revenue depends principally on pharmaceutical partnerships, clinical-trial testing and milestone payments, and eventual test commercialization; royalties are only a potential source.
  • Two prospective trials use the CELsignia HER2 Signaling Function Test: the Genentech/NSABP FACT 1 trial and the Puma/West Cancer Center FACT 2 trial. FACT 1 enrollment was below NSABP’s initial expectations. Interim results were then expected in early-to-mid 2021, with final results about nine months later; FACT 2 interim results were expected in mid-2021, with final results 9–12 months later.
  • A separate 35-patient metastatic colorectal cancer study was expected to finish in late 2021; Celcuity said it would not be paid for that testing. It also disclosed that additional clinical-trial payments could be due under existing agreements, including an estimated maximum of approximately $2.69 million under one agreement.
  • Key risks include unsuccessful or delayed trials, limited physician adoption, uncertain reimbursement and pricing, inability to secure partners or additional financing, evolving FDA oversight of laboratory-developed tests, reliance on a single Minneapolis laboratory, and intellectual-property and regulatory-compliance risks. The company reported no legal proceedings expected to have a material adverse effect and no off-balance-sheet arrangements.

Important facts for investors to verify

  • Cash runway assumptions behind management’s fourth-quarter 2021 estimate, including anticipated trial and commercialization spending.
  • FACT 1 enrollment progress and updated timing, plus enrollment, safety, and results for FACT 2.
  • Whether clinical evidence supports the tests’ proposed utility and whether pharmaceutical partners pursue companion-diagnostic programs.
  • Reimbursement, achievable test pricing, and the timing and terms of any commercial partnerships or additional financing.
  • Regulatory requirements for the tests and the company’s ability to maintain laboratory certification, operational continuity, and effective financial controls.